Are Investors getting mature ?
Another financial year comes to an end. It has been an amazing year for the financialization of household savings in this country. Despite volatility in the global markets, India has relatively done better (though I would have preferred Indian equities to go down more 🙂 ). But the equity market’s volatility, is not what gets my attention. Volatility is par for the course, if you are an equity investor. I am more fascinated by this narrative, that investors have become mature and are ready to ride out the interim volatility. Some pundits believe that investors have also become focused on the long run. Well, I am not really sure. Hey, I am not a pessimist, in fact, quite the opportunistic optimist (if ever there was a term like that). Let me explain:
My favourite term, that I have been using all of 2021, is TINA. If you are an avid political reader, I am sure, you would have heard of the term before. TINA is nothing but ‘There is no Alternative’. Investing world currently suffers from that. Look at the four major assets (easily available to non-institutional investor); equity, debt, gold and real estate. You can add cash as the fifth option, though it really isn’t an investment option ( it is an asset though). Debt returns are subdued. Real estate in the preceding 3-4 years has been flat to negative (except in my city; Hyderabad). Gold has also been flat too in the last 18 months. Keeping cash in a hyperinflation phase that we are in, is akin to losing your principal.
Can the cycle reverse ?
That brings us to TINA 🙂 and hence equity has been investor’s preferred choice. However, cycles change, equity returns over the next 1-2 years might not be palatable for most, forward looking debt returns might go up, value buying in real estate might make it look attractive again. Like Mike Tyson said, ‘everybody has a plan, until they get punched in the mouth’ :-). It would be interesting to see how this pans out in the investing world.
This isn’t bad news for equity investors at all, in fact, it would provide reasonable opportunities going forward. However, nothing less than 5 years should be your investing horizon and you would do well to not base your return expectation to the last 2 years
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