Investors should carry on steadily without getting distracted by the gloom and doom.
During the Second World War, the British government issued a motivational poster that had the slogan ‘Keep Calm and Carry On’. Somewhat inexplicably, the poster’s message has become popular again in the UK, including variants like mugs with the message “Keep Calm and Have Some Tea” and bags with “Keep Calm and Carry On Shopping”.
I think mutual fund companies and investment advisors should also issue posters that have some version of this message whenever the equity markets go into a tizzy. “Keep Calm and Carry On With Your SIP” would be appropriate. Since the 2008 financial crisis, whenever the prospects of the equity markets look shaky — a lot of mutual fund investors start thinking about stopping investing.
Looking back over the last few years, that would be the worst thing to do. It’s possible that you can’t see any silver linings to the clouds. However, investors have to ability to create their own silver linings.
“Buy when there’s blood on the streets,” said Baron Rothschild, the 18th century member of the Rothschild banking clan. The simple fact is that there’s no better time to create the foundations of a solid portfolio than when everyone else is running away from the markets. Eventually, over the long term, it’s the stock market crashes that produce profits for investors.
And it’s not as if the returns have been disastrous for those who have carried on over the last few years. SIP returns for the median equity fund over five years is 9% per annum.
Those are the returns in supposedly bad times. Persisting through such a time is what sets the stage for much higher returns over a complete market cycle. Despite the surfeit of gloom, investors should focus on the proven fact that those who stick it out eventually get the returns that they deserve.