Amid the chaotic environment in our country coupled with the economic slowdown, the Yes bank event, panic amidst coronavirus, the sentiment is extremely negative. Everyone is contemplating the next action and praying for things to fall into place.
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Steve Jobs used to tell people to go for a walk and “zoom-out”, to change your perspective and to look at the bigger picture. Sometimes it helps to zoom out and detach you from the current situation.
Let’s zoom out and take a look at the bigger picture.
Stock Markets reward long-term patient investors
Several people have been asking me and hyping the fact that it’s a big deal that markets have fallen 1000 – 2000 points in a day. If you put things into perspective, in percentage terms, these have been about 6-7% falls which have happened many times in the history of the markets.
Stock markets reward patient long-term investors. There’s no better way of making money other than owning a great bunch of Indian companies and ignoring the inevitable ups and downs of the market.
Owning stocks over the long-term is a sure shot way to success. In about 20 years from now, a 1000 points drop will probably look like a small 1-2% blip.
Also Read: Coronavirus in India: Current market fall can be a best buying opportunity for investors
Good stocks appreciate overtime and reward investors. Period.
Let’s take a few examples, if we look at TCS even during the Great Recession of 2008, it had fallen over 50% over a period of two years.But despite that, it bounced back from Rs 125 per share to highs of Rs 2284 (per share) by delivering a whopping CAGR return of 30% in the past 12 years. Or even if you look at Bajaj Finance, even though it fell over 80% from 2007-2009, it has been nothing but a wealth creator.
Hence, a pandemic is a one-off which will, in fact, create an opportunity for investors to create wealth over the next 10-12 years.
And we know for a fact that such quality companies will create wealth because even after a sharp decline they have shown strength with their stock prices always inching higher.
In the long run, when things are under control, markets will recover and the same businesses will be fairly priced again.
If we consider our everyday utilities, despite a slowdown we won’t stop consuming toothpaste or shampoo. This is exactly where companies like Hindustan Unilever and Colgate come into the picture since they will continue to create wealth as they have been in the past.
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