Last few months have been tough on investors. It’s not easy to see your money literally disappear. As a finance professional with years of experience, even my nerves are tested just as yours are. There is a feeling of helplessness and an urge to do something... anything. Sell, sell, sell.
At times like this, what helps me is the knowledge that the decisions I took were based on where I wanted to go and how I wanted to get there. And therefore sticking to my plan is the best thing I can do.
Where I wanted to go and how?
This is language we use when we plan a journey. (yes, I am fond of journey metaphors for investing!). And I am going to use google maps to illustrate my point this time.
I wanted to go from Bangalore to Chennai and here’s what google maps showed me.
Three choices varying from 6 h 40 mins to 8 h 25 min and the shortest, nicely picked out for me in blue.
Great! And off I go.
Hey, wait a minute. Something’s wrong. This route is actually going west whereas Chennai is to my east!
Should I go back and take the one where I go east (towards Chennai) and stay mostly in that direction - after all that’s where I am going.
On the other hand, Google says this other route is faster even though I’m going in the opposite direction.
Worse still, for almost 75 km (1/5th of the way) I continue going in another direction (and keep thinking about turning back) before turning east towards Chennai. Finally!
Investing journey is also like that. The straight path is not always the best and the best path often looks like it’s going in the wrong direction.
When the market goes south, it feels like we are headed in the wrong direction and that we should turn back. Turning back, in this case, means selling your investments and keeping money ‘safe’ in the bank.
Just remember that you have a goal and a plan that you chose by evaluating all the options. Sticking to it is the best thing you can do.