Give your investments 500 days

Dear Investors,

Hope you are keeping well.

While the movie 500 Days of Summer could be taken as a romantic comedy, the phrase Minimum Horizon of 500 Days (before the first portfolio review be done) should become a serious reality for equity investors to reap a good experience.

While the macro factors are currently uncertain, micro factors are giving enough reasons to stay invested. In the long run, we all know that the micro & macro converge and that is why we say: Give your investments 500 days, before the first portfolio review is done.

Every macro event has some negatives and some positives. A recent example is Covid-19. Also, if macro factors lead to a fall in price of good companies as their sector gets affected negatively, there can be an investment opportunity rather than a reason to stay aside.

A correction means that the market is turning better from incorrect to correct levels. So, investors should neither be too fearful, nor be too greedy; and have an entrepreneurial approach towards investing.

Equity is a game of non-linearity, and investing should be done with a returns focused mindset, and not risk focused. So, for investors who can afford to not worry about the downside for the first 500 days, equity turns out to be best asset class, and these investors should thus shift their focus from market risks to portfolio returns through growth in earnings of the underlying businesses.

Knowing that FY 21-22 was a good year for the markets, a lot of market participants are wondering whether FY 22-23 will maintain this stance? Or will markets witness a drawdown?

In Feb-March 2022, Nifty 50 experienced a drawdown of 7-8% from its peak and has recovered in April; so, market has hardly corrected and given the known and unknown macro risks of Covid, inflation, oil prices, war, and so on, the market can correct much more in 2022; after 2 strong years in 2020 and 2021. So, investors should be prepared for correction and accept the risk of a downside.

But for all investors who accept the 500 Days approach, they should neither be too fearful, nor be too greedy and welcome a correction in 2022 with a cautiously optimistic and opportunist approach.

So, a risk focused equity investing mindset is a wrong approach. While investing in equities, investors must accept and assume risk, and approach equity investing entrepreneurially, by focusing on returns. This is practically possible by giving a minimum of 500 days to your portfolio, without worrying much.

To read the full article, visit:

https://www.moneycontrol.com/news/business/markets/daily-voice-markets-can-fall-below-recent-lows-only-if-both-fiis-and-diis-start-selling-at-the-same-time-which-looks-unlikely-for-known-risks-kamal-manocha-of-pms-aif-world-8266981.html