“I want to stop my equity mutual fund SIPs.”
“Bank deposits would have given me better returns than equity stocks and mutual funds.”
“Global investments have performed better. I want to invest globally.”
These are some of the familiar reactions I hear from investors after the relatively subdued performance of Indian equities over the last couple of years.
And I understand why.
Investors had experienced mouth-watering returns between 2020 and 2024, particularly during the post-Covid rally. When those returns normalize, anything less can feel disappointing.
But let's do some fact-checking and, more importantly, put things in perspective.
1. Equity investments don't come with an annual return obligation.
Bank deposits offer a contracted rate of interest. Equity doesn't.
Some years can be spectacular. Some years can be disappointing. There can also be long periods of stagnation.
That is the nature of equity investing.
2. Don't judge equity by the last one or two years.
The recent five-year experience in the Nifty 50 has actually been much more modest than the extraordinary returns investors saw during the post-Covid period. That is precisely why looking at one particular period can be misleading. However, the returns on SIP and lumpsum over last 10 years are still above 10% p.a.
3. History is full of periods of stagnation and underperformance.
Markets have repeatedly gone through long phases where investors questioned whether equity investing would work at all.
Those periods have often provided the foundation for subsequent long-term wealth creation.
4. For a regular saver, stagnation can actually work in your favor.
If you are accumulating equity investments through SIPs, lower prices mean that the same amount of money buys more units.
You don't need the market to go up every month.
You need a sensible strategy, adequate time and the discipline to continue investing.
5. Wealth creation is often built during uncomfortable periods.
Bull markets make investing look easy.
Difficult markets test whether you actually have a plan.
And when valuations become euphoric and investors start believing that easy returns are permanent, the risk of poor decisions increases.
So, what should you do?
1. Don't do anything impulsive. Stay the course.
Don't change a long-term strategy simply because the last two years have been disappointing.
2. Own quality.
Have good-quality equity mutual funds and stocks—not a collection of dozens of investments.
3. Continue your regular investments.
If your goals, time horizon and asset allocation haven't changed, a temporary market phase by itself is not a reason to stop your SIPs.
4. Give equity adequate time.
Equity is meant for long-term goals. A five-year horizon can still be uncomfortable; longer horizons provide a better framework for dealing with market cycles.
5. Be selective about IPOs.
You don't have to participate in every IPO simply because everyone around you is talking about it.
6. Focus on asset allocation and diversification.
The objective isn't to find the next multibagger.
It is to construct a portfolio that you can live with through different market cycles.
7. Stop checking your portfolio every day.
Once a quarter—or even once in six months—may be enough for a long-term investor.
There are better things to track in life.
8. Keep short-term and emergency money safe.
Money required in the near term should not depend on the behaviour of equity markets. Use appropriate safer instruments such as bank deposits or suitable debt funds, depending on the requirement.
Finally,
You cannot control the economy.
You cannot control interest rates.
You cannot control geopolitical events.
You certainly cannot control the stock market.
So, focus on what you can control.
- Your savings.
- Your asset allocation.
- The quality of your investments.
- Your costs and taxes.
- Your behaviour.
- And most importantly, your discipline.
Read history. Understand market cycles. Have a long-term perspective. And, where necessary, take professional advice.
If getting wealthy were as simple as accessing information and data, everyone with a smartphone would be wealthy.
As Warren Buffett famously put it:
“Only when the tide goes out, do you discover who has been swimming naked.”
The real test of an investor isn't what you do when markets are rising.
It is what you do when they aren't.
Are you game?
If you have missed any of our previous articles, please visit
https://naveenrego.com/blog-grid.php?aW5pdGlhdGl2ZXNfdHlwZV9pZA=MQ
Happy Financial Planning!
Naveen Julian Rego – CFP®
MD & Principal Officer
Naveen Rego Capital
SEBI Registered Investment Adviser
Reg No: INA000019211
BSE Enlistment No: 2178
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- Investment in the securities market is subject to market risks. Read all related documents before investing.
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