Wednesday, April 30, 2008

Don’t Let The Markets Control You

A few months ago, several retail investors had entered panic mode as the markets were correcting very sharply. I remember how certain people further fuelled the panic by making comments of absolute doom. Now once again markets have bounced back up since then, and we have people making comments of absolute bliss. At that time I suggested people not to sell in a panic and study the fundamentals of the companies they had invested in.

Now I am telling people to not simply be carried away by hype and not to invest blindly. Irrespective of where the market is, our job as an investor is to study the fundamentals of the business we are investing into. We can’t really predict where the market is going to be. Some businesses are less affected by global financial crisis, while others are more affected by it. A bank which is involved with the West when it comes to certain credit instruments might be more affected than say a company selling milk products and daily consumer goods to retail consumers in India.

Nothing could be worse than following ideas and myths about absolute doom and absolute bliss. The world is going to face some channelling times, due to what has happened in the West, however it is not permanent. I feel over time we will come to know the insides of the problem.

However most businesses which are India based and are focused on the Indian consumption and growth story will surely reward investors in the long run. India according to me is still at a point where say a country like China was during the 1980s or say Japan was during the 1950s and 1960s. Of course we have a lot of differences and it wouldn’t be fair to compare India to any other country. But what I am trying to say is that still growth has not saturated and there is a long way to go.

Sometimes stock markets will portray this and at other times stock markets will discount this. Let us say tomorrow the stock markets correct, does that mean the country stops growing? Similarly let us say because of stock manipulations or aggressive buying the Sensex goes to 40,000 in the next one year, does that mean the economy too is growing that fast?

In the long run lot of money is going to come to India. I have been interacting with a lot of big investors in the Middle East, who seem to get richer and richer by the day due to their oil wealth. We can all see oil prices rising. This means more money coming into the Middle East. Many of them want to invest in India now. They aren’t too happy with the West and feel it is much better to get into India now as compared to China.

I know there is a lot of money that is waiting to come into India, however there is also the risk of some money going out in the short term due to problems in the West. As investors we can either worry about such things, or simply mind our own business and look at the businesses we have invested in.

In case you are a market watcher. Do remember that it makes more sense to not bother too much about each bit of news as compared to constantly scrambling and running behind information which might not be needed. If you remember the Sensex was 100 on 1st April 1979. Today we are around 17,000 on 29th April 2008. Not too bad, is it? Imagine what all happened over this time. We had scams, economic problems, the License Raj and all sorts of challenges, still things are really that bad now, are they?

No wonder fools like me who continue thinking for the long term and believing in the India story do end up much more than what they started out with. I thank God that I was lucky enough to be born in India and have the opportunity to make the most of the economic growth as well as the economic challenges present in our country. Never let the market control you, rather be the one who is in control of yourself.

We need to spread this way of thinking and mindset to millions of more people. It will happen.

Keep smiling and happy wealth creation!

Yogesh Chabria

© Happionaire

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Anonymous said...

Just finished reading your book Yogesh and that is how I found your blog. The book was one of the best and simplest book every written on investing. It is really nice to see somebody trying to bring some logic and simplicity into the world of investing. ITHW is a book any investor should read and treasure for the rest of their life.

Anonymous said...

Yes, you are correct. The analysts are only trying to confuse common people. It is best to just follow basics and invest and not worry too much.

Anonymous said...

Very true all we need to see is that a rise from 100 to 17,000 is something very easily anybody could be a art of, if they had just held on.

Anonymous said...

I do not know how to say this, but you have had a very positive impact on my life. Not only did I not sell when those heartless 'analysts' were spreading panic but also you have motivated me a lot.

Where did they disappear now? They said markets will go to 10,000 and all they wanted to do is make small investors sell in panic, so they could buy.

Thanks for helping us out. I will sell the stocks which are not fundamentally strong now and follow your reports. I also read your book Yogesh, it has so much power in it and yet it is so simple.

Anonymous said...

I'm in full agreement with your Ishdeep. I have saved not just a lot of money but also have got something more priceless and that is peace of mind. I went and also bought ITHW, and it is truly a book somebody will cherish for life. People find out that there is more to life than just money when it is too late. I would suggest everybody to read this book because it goes beyond just stocks and finance.