These two words are enough to describe the situation of the investment world today. Greed forces oneself to make wrong choices and fear also apparently does the same thing. Whether one makes money or loses money is dependent on how much one allows these forces to have a control over them. Warren Buffet has very aptly tapped these words, when he says that “Be fearful when others are greedy and be greedy when others are fearful”.
The last 6 months have been pretty bad for investors. A majority of the investors haven’t made money in spite of the index touching an all-time high. This is probably one of the most hated all-time highs of Sensex.
Index always indicates how the stock markets have performed, however it is not the case this time. In the last one year, out of 50 Nifty stocks, only 10 of them have been able to make money for the investors and they are the ones that are responsible for the markets touching an all-time high. Valuation correction has been pretty sharp in mid and small caps. Similar is the case with BSE. If we exclude the market cap of the top 10 stocks, the remaining 4000 stocks listed on BSE have lost whopping INR 16.70 lakh crores since January 2018 and more than 300 stocks have fallen anywhere between 50%-90% from their 52-week highs.
Rising inflation, high oil prices, unclear election results are not allowing the markets to go high whereas factors such as domestic liquidity is not allowing the markets to go down.
In such a situation, it will be incorrect for an investor to think that their portfolios are down (in spite of all-time high markets) because of wrong investment decisions. It is important to understand that these kinds of situations are rare and should be dealt with patience. Thus, making it even more essential for one to trust the fund managers / advisors and continue with his/her investments. Markets are bound to remain irrational but an investor should not.
Undoubtedly, returns can be generated only through proper asset allocation and following a disciplined way of investing. Noise will always be there. But, what is vital is that one learns to avoid/ ignore this noise and focus on long term investments. Remember Rome was not built in one day but Hiroshima and Nagasaki were destroyed in one day.
“If you want to have a better performance than the crowd, you must do things differently from the crowd.”
busyinvestor 