Dear fellow investors,
Greetings!
It is said that tough times are the litmus test of character. If that is so, the current investment environment must surely be testing the character of equity investors worldwide. While good times lull oneself into believing that one is a genius, difficult times make us feel like we are failures. However, both these extremes do not depict an accurate picture.
From February 2014 to March 2015 (Colloquially known as the 'Narendra Modi Rally'), making money through equities seemed like the easiest thing in the world. Then onwards, gradually, it appears that making money in anything but equities is easy. As often happens, perceptions change faster than the underlying reality.
Seemingly paradoxical factors like slowing global growth in one area & rising interest rates in another, falling commodity prices in some countries & falling unemployment in others are going head-to-head with the usual suspects such as entrenched geo-political tensions, rising political queasiness, lack of reforms on the domestic front, etc.
All these are causing considerable disquiet among some of you. We are being asked questions like...”Do you think we will see a reprise of 2008?”, “At what level will we bottom out?”, “Is the India story over?”, etc.
We do not profess to know the answers to all your questions. We do not really know where the bottom is or when the market will make a new high. Similarly, we cannot 'confidently' say that interest rates in the USA will keep rising or that rates in India will keep falling or where oil / the Indian rupee is headed.
However, we do know certain things:
History has consistently proven that equities are the best asset class to beat inflation over long holding periods.
Purchasing stocks / equity funds during times of pain, is more rewarding than purchasing them when the atmosphere is cheery. The best time to buy is when you are fearful and least feel like buying. Ask yourself : Are you feeling that way right now?
When in doubt, investing through a Systematic Investment Plan (SIP) is the best approach. It instills discipline and de-links the emotional element from the act of investing.
I suggest you refer to the section 'Investment Lessons' on our website for evidence of these three assertions.
At PPFAS Mutual Fund, we have resolved not to be perturbed by the mood-swings around us. We were neither euphoric in early 2015, nor despondent today. This, despite us having our skin in the game by holding nearly 12% of Parag Parikh Flexi Cap Fund's corpus.
However, such impassivity should not be mistaken for apathy or ignorance. Our investment team is willing and able to respond appropriately to various evolving scenarios. While we do not ignore macro-trends, our unwavering focus remains on choosing good businesses at sensible valuations and holding on to them across business cycles.
Our Founder, Mr. Parag Parikh is never far from our hearts. It will be worthwhile to recount some of his teachings during these turbulent times:
“Nothing is permanent. Good times will be followed by bad times...and vice versa. Maintain your equanimity in all circumstances.”
“The Law Of the Farm will always reign supreme. You cannot sow something today and reap tomorrow. Just like every seed has to pass through several phases before maturing, so do your investments.”
“Success in investing is as much dependent on patience and diligence, as it is on competence.”
When it comes to forecasting... “Your guess is as good as mine”.
