Year 2018 witnessed turmoil and caused anxiety to investors, but there's nothing unusual about it. If you look closely at all the negative developments--slow growth of corporate earnings, oil prices going up, depreciating rupee and other such developments, you'll notice that these are all cyclical in nature and happen every few years.
Most investors are disappointed because their expectations, built upon the performance of equity markets in 2017, didn't materialise. In 2017, small caps were up 50-55%. Investors who were investing in them, expecting that their performance will extend in 2018 as well, were in for a nasty surprise. In equity investing, our expectations hardly come true in the short run.
What was actually very disappointing was the decline in the value of a few liquid funds due to the IL&FS crisis. This is something you don't expect from liquid funds.
But on the brighter side, small investors demonstrated much more mature behaviour in 2018. Earlier, mutual funds used to receive money only when the market were doing good. But this time, despite the decline, investors have continued with their SIPs. The amount of money flowing in through SIPs increased every month. That lays down a great foundation for small investors to benefit from in the long run.
The forthcoming general elections don't matter much from the perspective of investing. If you look at the trend since 1990, there is no big shift in the economic policies because of a change in the government. The pace of reforms and the perception of corruption may have changed with a change in the government, but we've continued to move in the right direction. As long as the economy is growing over the long-term, elections or the government doesn't matter. Election results do impact sentiments in the short-term but they hardly have any impact over a long period of time. The primary driver of businesses is their ability to make money, not the government. If they are making more money they will be valued higher.
Investors should follow the same old principles which Value Research has always emphasized on--be systematic and invest regularly with a long-term perspective. You should continue with your SIPs even in bad times. And if you are new to equity or you get easily nervous, then start with an aggressive hybrid fund.
Click here, to register for the forthcoming episode of Investors' Hangout and post your question for Dhirendra Kumar.