A year ago, on March 23, 2020, the stock market stopped falling because it feared the global economy could stall due to the pandemic. From February 18, 2020 to March 23, 2020, the nifty fell 36.5%. On March 23, 2020, we saw the biggest drop in the day of 13.5%. The 10-year Nifty SIP yield fell to 2.3%, the 14-year SIP yield to 5%. Even in May, my XIRR stock bond portfolio was only 2.75% after 12 years! Here are some lessons from the episode.

1. “Staying invested” is not wisdom. It’s an afterthought

As of March 23, 2020, no one could predict that the Nifty will zoom 94% in the next 12 months. People who point to this growth and say “this is why you should stay invested” are prejudiced with hindsight. In fact, we know that on March 23, 2020, autumn only ended in hindsight.

Another “fact” in hindsight, when it happened it felt like 2008 again, but no, it isn’t!

Sensex Log Scale crashes
Sensex Log Scale crashes

2. Waiting for recovery leaves it to luck

The recovery could have taken years, or even if there had been a recovery, years of sideways movement for years. So “waiting” simply means leaving the fate of your hard-earned money to luck. Yes, some people should stay invested. Some people should wait, but only after evaluating whether one can afford it.

A better plan to have a plan that can handle any kind of return sequence. Have a plan that not only includes systematic investing but also systematic risk management through a variable asset allocation plan. Invest Right With This Free Seminar: Portfolio Construction Basics: A Beginner’s Guide

Stock exchange versus portfolio
Stock exchange versus portfolio

3. Mutual funds or equity are not compounded. Just confusing

Yes, the stock market will move up over the long term (gold too), but that doesn’t mean you will get “high returns”.

See: Don’t be fooled: mutual funds have no compound interest!

Power of Compounding vs Power of Confusing
Power of Compounding vs Power of Confusing

4. This too will pass!

This was drawn in December 2020. I think, it Has passed!

This too will pass!
This too will pass!

5. Beware of CAGR / XIRR / annualized returns! All of them are in hindsight!

When someone says they made 15% in the last year, we need to stop and realize that, in hindsight, this is a point-to-point assessment of growth. The trip is almost always forgotten.CAGR

CAGR!

6. When things go well, nobody complains; When things go bad …

Okay, so this is referring to the six closed-ended mutual funds and not the stock market.

Returns positive and negative
Returns positive and negative

7. If you want the rainbow, you have to endure the rain

Risk without rewards
Risk without rewards

8. If you say there is a “pattern” there is!

If you read about self-likeness and fractals, you’ll see them everywhere! See Also: Five Books That Will Redefine Your Understanding of Stock Markets

Self-likeness
Self-likeness

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My new book for children: “Chinchu is getting a superpower!” is now available!

Both boy and girl versions of Chinchu are given a superpower
Both boy and girl versions of Chinchu are given a superpower.

Most investor problems stem from a lack of informed decision making. We all made bad decisions and money mistakes when we started making money and spent years correcting those mistakes. Why should our children go through the same pain? What is this book about? If we, as parents, had to cultivate in our children a skill that is critical not just to money management and investment but to every aspect of life, what would it be? My answer: Good decision making. In this book we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parents plan it and teach him some key decision making and money management ideas is the narrative. What the readers say!

Feedback from a young reader after reading Chinchu receives a superpower (small version)
Feedback from a young reader after reading Chinchu is getting a superpower!

Must be a book for adults too! This is something every parent should teach their children from a young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple words. – – Arun.

Buy the book: Chinchu Gets a Superpower for Your Child!


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About the author Pattabiraman Editor freefincalM. Pattabiraman(PhD) is the founder, managing editor and lead author of freefincal. He is an Associate Professor at the Indian Institute of Technology in Madras. since August 2006. Connect with him via Twitter or Linkedin Pattabiraman co-authored two printed books, You can also be rich with goal-oriented investing (CNBC TV18) and Game changer and seven others free e-books on various money management topics. He is the patron and co-founder of “Paid India,“An organization promoting impartial, commission-free investment advice. He conducts free money management sessions for companies and associations based on money management. Include previous engagements World bank, RBI, BHEL, Asian Colors, Cognizant, Madras Nuclear Power Plant, Honeywell, Tamil Nadu Investors Association, IIST Alumni Association. Write to Pattu for a chat [at] freefincal [dot] com


About freefincal & its Content Policy Freefincal is a news media organization dedicated to providing original analysis, reports, reviews and insights into developments in mutual funds, stocks, investments, retirement planning and personal finance. We do this without any conflict of interest or bias. follow us on Google news. Freefincal serves more than one million readers (2.5 million page views) annually with articles that are based only on facts and detailed analysis of its authors. All statements are verified from credible and knowledgeable sources prior to publication. Freefincal does not publish any paid articles, promotions, PR, satire or opinions without data. All opinions presented are only conclusions that are supported by verifiable, reproducible evidence / data. Contact information: Letters {at} freefincal {dot} com (sponsored contributions or paid collaborations are not maintained)


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