As we witnessed that market was not doing well in recent past
and our mutual funds too. But now nifty rallied supported by some of its constituents.
But the broader market (Mid & small cap) still lagging behind. There are
some factors for this like
- Trade war between US & China
- Brexit
- Crude oil Prices
- And in Indian prospective this is a year of elections.
We have many instances in the past where markets have not performed but then
it gave very good returns within few months. For example, 2008 and 2009 was the time when most of
investor lost their investment. Some of them booked the loss and the rest who
have not exited at the low and waited for some more time, got the reward. Let me
give you an example. For this I have taken Reliance Large Cap Fund.
Suppose two
person A & B started investment through SIP route in march 2007. The SIP amount for both the investors is 10000 per month. Everything was good for 2007
but in 2008 recession hits the market. Market tested the patience and commitment
of the investor too. Our both investors were still investing with SIP. But in march
2009, A stopped the sip and exited form the fund with heavy loss around 64000.
B was still doing the SIP and as market cycle turned in 2009 and in jan-2010 fund
value for B was up by more than 76000. We can see here that 10 more months can do the task. It can change the yield of -41% to of 19% for entire time period.
Please refer the below table for your reference.
Please note this is just an example of one bear phase and a
fund. We can do the same exercise with any other good and consistent fund for any dull market
period like feb-2010 to june-2012 and feb-2010 to jan-2013. Here the difference in
time is even lesser. This shows the volatility of the equity market.
Currently we also passing through a bearish phase. All the
factors mentioned above will get resolve in their own time. Second half of 2019
will be a good time for market. It may take one or two quarter more. General
elections have the effect on equity market for very short period of time. Market
want a stable government neither left not right. When ever people voted for
majority, market rewarded.
Equity investment is not for short term. It is always better
to give your fund to grow. Timing the market is possible for anyone. But we can
beat this with our presence “time in the market”. Choose the right funds aligned
with your risk profile and goals and stick to the plan.
Hope this will help…
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