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How do I make sense of recent investor behaviour?

Ignore the noise and focus on things that are under your control, says Dhirendra Kumar

There were concerns of equity mutual fund outflows in July, an increase in movements into debt funds and now many first-time robinhood investors are entering the stock market. Can you please shed light on seemingly divergent behaviours? And what is the way forward in the current scenario when the economy is lagging the market?
- Kiran Krishnan

All of these are true but you have absolutely no control over instances like investors investing money, markets going up, the economy not doing well, companies reporting poor earnings and so on.
Things which are under your control or for which you have greater visibility are your circumstances like - are you going to lose your job? Is there going to be a reduction in your income because the business that you work for or you run is not going to do as good as it used to in the past? So, you may tweak those things because you have greater estimation of things here.

At the same time, the market is not going down simply because everybody thinks that this slowdown is for the next four or five quarters and things will bounce back. We have come across the first quarterly earnings following the outbreak of this crisis and we see that real earnings have come down but most managements actually give it a rider except for some businesses which will be impaired very badly and it will take them a long time to recover. But many businesses are getting back on track and they're hopeful as they're witnessing that some of the disruptions are getting moderated or normalised. So, everybody is of the view that it's a one-year write-off, but things will be back to the same old ways of a steady rise and growth from thereon.

I would say that focus on the things that you can control. You know what part of your money you don't need in the long term, say, for five-ten years and invest that money in equity through mutual funds or stock portfolio if you have the temperament. You can choose the investment vehicle depending on how bad you're hurt by the madness of the market. Different vehicles give you different experiences. With regard to mutual funds, if you get very anxious and if you're very worried about things happening around, then aggressive hybrid funds are good enough. Otherwise, multi-cap funds or tax-saving funds are a good way to start. However, investing regularly is important. If you are fine with building a stock portfolio, have the temperament, like reading our stock reports and are willing to subscribe and spend some time, then go ahead and do that. But worrying about who else is doing what is not going to take you anywhere.

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