On the face of it, there is nothing about this year that could possibly inspire a feeling of positivity—the pandemic and all the turmoil it has caused, physically, emotionally, and financially. But I have a slightly different perspective on this. And I would like to share my experience about investments and the stock market over these past five months, straight from my heart. These last few months have been a memorable lesson in how the right attitude can help you find opportunity even in the darkest of days.
Having pondered over it for a while now and given what the world is going through, I thought it would be a relevant topic to write about. What I have to say is based not just my own experience of making investments, which spans almost two decades, but also on the uncertainty that has gripped all of us over the last few months. And how my learnings as a CFP contributed to my investment decisions.
At the outset I would like to state that since I come from a business family, my mind set and approach to investments differs from that of an employed professional.
In my working life, I have witnessed three share market crashes, the earliest one being the infamous Harshad Mehta scam. I had very little knowledge about what happened, most of which was from news reports. But what I heard was enough to make me wary of the stock market. Normally, people refrain from getting into it if they burn their fingers once, but after understanding it at a deeper level and the extensive learning from the CFP curriculum, I realized that the stock market can be a reliable source of making money. However, you must have a plan backed by insightful understanding and patience.
When the global COVID-19 crisis started, I was a bit reassured and confident that with my experience and knowledge as a CFP, I would be able to earn some money from the stock market via mutual funds. This was also the time when many people realized the importance of asset allocation.
I liquidated some of our debt instruments and Gold investments, divided the amount into four parts, and waited.
I invested my first tranche with NIFTY at 9197 and the second when it was at 8469. After that, NIFTY hit a low of 7500; at that point, everyone thought that it would decrease further. And so we waited some more. Then, the markets started rising and hit 9800. The technical indicators recommended an exit, so I exited one part after making a profit of around 16% (Absolute returns). Now, the profits to the part left invested show returns of around 35% (Absolute returns)! I’m, at the moment, waiting to make my next move. Of course these investments were done considering long-term horizon and according to my risk profile, I am ready to hold this amount for many years without compromising on my other goals.
Based on this experience, I have realized that knowledge and experience give you the strength to take discerning, carefully considered decisions and it is up to you to act and reap the rewards.
Another thing that I would like to point out is my state of mind at the time. I wasn’t making any hasty decisions out of anxiety. I was disciplined about the plan and executed it patiently. I think that is one of the main reasons that I made a profit. I held on to the funds and waited till they exceeded the returns. I would go so far as to say that this current economic environment helped me learn in a way that no course manual could. It helped me gauge my own nature when dealing with uncertainty. None of this was an easy ride emotionally, as I was second-guessing every decision:
Should I invest more?
Should I have invested more at the low?
Why did I withdraw some at that level?
Should I withdraw all to book the profit?
Many such questions plagued me with every decision I took.
The upside was that knowledge and prior experience allowed me to control my emotions and behaviour.
Over the course of these difficult months, I realized the importance of approaching investment with a level head, studying reliable sources for information and then taking a call. There are a lot of people who enjoy giving advice, like agents and brokers. They are always around to tell you all about the rising prices of stocks but instead of believing them blindly and investing in stocks on their say-so, think carefully before making a move. If agents were always right, wouldn’t they have made a lot of money at every turn?
I would like to end my experience by sharing a small diagram that illustrates the various reasons that affect our investments in their order of importance. At the base of the pyramid is investor behaviour, indicating that it has the most impact, while the taxes you pay on the money you earn have the least impact.
Given the significance that behaviour has on investment decisions, always move wisely. Be sure you make a plan, be disciplined in implementing it and be patient as you wait to earn the rewards from it.
Do this and success will be yours!
Thank you
Anand Mhapralkar
CERTIFIED FINANCIAL PLANNER CM
+91 9820663784
Anant Wealth 