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Get Time Machine Tested

Don’t stay married to wrong investing decisions, opportunities abound in the future

If you have read or watched Harry Potter and the Prisoner of Azkaban you will be familiar with the device called the Time-Turner. This is a tool that can be used to travel back through time, a sort of an undo facility for one’s actions. In the story, Harry, Ron and Hermione use the Time-Turner to travel back into time by three hours and change the course of events. It seems to me that such a device is sorely needed by many equity and equity fund investors nowadays.

The bellwether stock market indices have shot up by about 45 per cent since March 9, most stocks are up anywhere between 20 to 60 per cent and equity funds (even though they have generally underperformed the indices) too are up 20 to 60 per cent. In short, the gloom has definitely lifted. Or has it? Actually, I find there are more people regretful at not having invested than are happy at having made money. Incidentally, this includes almost all equity fund managers and other professional investors too. By and large, all of them have either a large proportion of their assets parked in cash, or are invested in steady sectors that haven’t been too hot recently.

In recent days the most frequent query I get is, “I stopped my SIPs in October. Should I restart them now?” Or even worse, “I redeemed my investments in October, should I invest again or should I wait for the markets to dip?” The answer is obvious and has been so for months now. The whole point of investing steadily in a mutual fund, either through an SIP or otherwise, is to continue doing so in bad times. Time and again, analysts like myself have pointed out how investing in bad times is almost the entire point of investing. Historically, every single market crash has eventually proven to be nothing but a buying opportunity which can easily be made to serve the purpose of boosting one’s returns.

Anyhow, I think it’s clear that there are a huge number of investors of all kinds who are in a state of panic that the train has left the station. Unfortunately, many of these investors (and investments managers) find themselves in a very tight spot now. They feel they are caught between two equally unpalatable options. They could pile their money into equities and funds right now and try and catch any more upside that there might be. Or they could continue to wait on the sidelines, still trying to time the markets while waiting for a dip in stock prices. Either approach could go wrong disastrously. You could invest now and find yourselves in a dip; or you could stay out and find that the rally is going on and on.

Either way, the moral of the story is what it always is. Don’t try to time the market and if you have been doing so, then stop right now. I can’t speak for professional investors because they have their own compulsions, but individual investors who rely on mutual funds should return to the straight and narrow immediately. All your long-term investments must keep going steadily into equity or hybrid mutual funds.

If you stopped investing in October or November, fine, just put that opportunity loss to a mistake from which you must try and learn. Just your investment programme back on track right away. There will be many opportunities down the road.