Be the investor who can sleep during crises

Summary: 'Is everything going to be all right?' Dhirendra Kumar has received that question through every crisis since the dot-com collapse. His honest answer, and what actually helps, is worth reading.

There is a reliable pattern to what happens in my inbox during periods like these. On an ordinary week, the questions that come in through Fund Advisor and from members generally concern funds, whether to pick one, whether to shift from one category to another, what to make of a particular fund manager’s recent decisions. They are, in other words, questions about investing.

But when oil prices spike and television anchors start shrieking even louder than normal, the questions that arrive are not really about funds at all. They are about fear. They arrive dressed as investment queries, “Should I pause my SIPs?”, “Is this a good time to move to debt?”, “How much has my portfolio fallen?” But what they are actually asking is something simpler and more human: Is everything going to be all right?

I have been in this business long enough to have received versions of that question many times. During the dot-com collapse. After the 2008 crisis. During the Covid crash of March 2020. And now, with conflict near the Strait of Hormuz, sending oil prices past levels that make people genuinely nervous. Each time, the question is the same. And each time, the honest answer is the same: probably yes, but not because of anything you can do about it in the next 48 hours.

What I find more interesting than the question, though, is the anxiety underneath it, and where that anxiety actually comes from. In my experience, the investors who are most rattled during a crisis are not necessarily those whose portfolios have fallen the most. They are the ones who cannot clearly see what they own.

The investor who has accumulated funds across three platforms, in the names of various family members, some bought through an advisor, some directly, some remembered, some half-forgotten, is in genuine trouble during moments like this. Not because his portfolio is necessarily worse than anyone else’s, but because he cannot see it. And what you cannot see, your imagination will fill in for you, almost always with something worse than the reality.

This is one of the things I had in mind when we built the portfolio analysis tools in Value Research Fund Advisor. The ability to bring all your family’s investments into a single view, your own, your spouse’s, your parents’, your children’s, is not merely a convenience feature. It is, I would argue, the most important crisis-management tool a retail investor can have.

When you can see everything in one place and each fund has a clear Buy, Sell, or Hold signal attached, the question “should I do anything?” mostly answers itself. You look and see that your SIP ran as scheduled, that the funds you hold are rated the same as last month, and that no alarms have been triggered on any of them. You close the app. You get on with your day.

The deeper argument, though, is one worth making explicitly. A well-constructed portfolio, one built around your actual goals, your time horizon and a sensible allocation across asset types, was already designed for exactly this kind of crisis.

Not because anyone at Value Research predicted an Iran conflict, or because our Portfolio Planner has a view on the Strait of Hormuz. It has no such view, and neither do I. What a goal-based portfolio assumes, at the construction stage, is that bad things can happen. That there will be periods of sharp market falls. That oil will spike, or interest rates will move unexpectedly, or some geopolitical event will cause headlines that feel, in the moment, like the beginning of something permanent.

The asset allocation built into your portfolio is the acknowledgement of that uncertainty, expressed in numbers. It is, in a sense, the opposite of a prediction. It is a systematic admission that we do not know what will happen, and a structure built to survive that not-knowing.

This is what distinguishes goal-based investing from the more common alternative: investing based on a general feeling that the future will look more or less like the recent past.

That second kind of investor is the one most destabilised by moments like these. His mental model has been disrupted. The goal-based investor, ideally, experiences something different, not indifference to what is happening, but a recognition that such events were already, in a sense, anticipated. Not predicted, but budgeted for. I am aware that this can sound too easy. The gap between knowing you should hold steady and actually holding steady, when your cooking gas is becoming more expensive and the news is relentlessly grim, is not trivial.

This is exactly why I believe that the most valuable thing Fund Advisor provides during a crisis is not advice, it is clarity. I can give advice in a column, or at Fund Advisor Live on Saturday mornings when my team and I work through member questions in real time. What a column cannot give you is the ability to look at your own specific situation, with your own specific funds, and see that it is intact. For that, you need to be able to see your portfolio clearly. Most Indian investors, if they are honest, cannot do this on an ordinary day. During a crisis, the cost of that opacity becomes very visible.

There is one more thing worth saying. When crises like these arrive, a certain kind of financial intermediary becomes very active. Calls get made. Meetings get proposed. The message, sometimes spoken and sometimes implied, is that something should be done, and that doing it requires going through the intermediary.

I am not suggesting that all of this is cynical, some of it is genuine concern. But the structure of commission-based advice means that action always pays the seller better than inaction.

The flat-fee model that Fund Advisor runs on has no such incentive. When I say your portfolio is probably fine and you should leave it alone, there is no revenue consequence for my company either way. That alignment, between what is good for you and what our business model rewards, is worth a lot when everyone else appears to have a strong view about what you should do urgently.

Questions like the ones arriving in my inbox are usually answered not by anything I say, but by the passage of time. Investors who can see their portfolios clearly and who find them to be what they expected will find it easier to stay calm than those who cannot. That is the design intention. And on the evidence of the past 30 years, it still holds.

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