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How will the markets move?

The inspiration for this note from Swanand Kelkars article in Mint :How will the markets fare?

This is the most asked question by investors to advisors, truth be told, this is also the most hated question as  the correct answer is ‘ we don’t know’,  but this is seldom the answer. The market expert will say something like “3rd quarter GDP was up but the CAD came down which made the inflation outlook hazy increasing the chances of a …” etc while this sounds as if the person knows what he is talking about, in reality he is saying i-have-no-idea in as many words as possible throwing jargons all over the way.

Why does this happen, in any other industry, say you are  in banking or IT and are senior enough to be considered an expert, you would be telling if asked by a friend how is your industry, you can say this is where the industry is and these are the positives and negatives and this is how the industry can fare in future.Now this is itself tough in industries with clear data, growth projections etc. as things change fast. IT was supposed to grow at a healthy space but now many entry level jobs are being automated leading to slower growth.

In stocks markets however it is almost impossible to predict short term movements, as there are too many factors which are never clear in short term. However in the long term ( 7-10 years at least) equity markets are clear as sky, Companies sell products and make profits, the economy grows, and equity prices of these companies grow, the NAV of your fund which has these stocks grow, that is all.  While the returns can be higher or lower, one is likely to get a good return compared to other options.

But if you are investing for short term, say a year or two, it can turn out to be good or disastrous, we will know which after a year or two !

So, instead of focusing on how will markets move, which no one can predict, Focus on things you can control, your own finances, how much you can save and invest. Invest for the long term,  Check the portfolio once a year and think of how to earn more money in your profession and save more money in your expenses rather  than how will markets move. You are likely to be in a good place if you do that.

Merry Christmas and Happy holidays




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