The patience that is killing your investment journey

When patience runs out

Kevin and I generally meet after our dinner for a brisk walk. That day too we had met for our walk, but Kevin was quite upset.

Seeing him upset, I asked, "Hey, Kevin, what are you upset about?"

He replied, "I am upset about the performance of my portfolio."

He asked, "When is our market going to go up? I am frustrated now — if I had invested the same money in fixed deposits instead of investing in mutual funds. This lack of performance in the portfolio is giving me sleepless nights."

I have never seen Kevin so frustrated. He has been investing in mutual funds and equities through me for a long time now. He was quite happy with the overall performance of the portfolio, but the zero performance or non-performance of his portfolio for the past two years was making him a bit nervous as well as a little frustrated. Ultimately, money is invested to make returns on it and not to sit idle, and Kevin's patience is running out.

What Was Really Happening in the Market?

I asked him some basic questions to make him understand the rationale behind the non-performance and what was actually happening in the market.

I asked Kevin, since the day Donald Trump became president, what was the noise that was going around?

He replied, "I think it was all Tariff."

I asked another question — after the Tariff was on the verge of closure, what erupted?

Kevin replied, "It was war between USA-Israel and Iran."

Correct, these were the two main reasons — not only India but global economies were struggling economically. Do you know how much it impacted us?

Kevin's instant reply: "No."

This was a double shock to the Indian economy which actually derailed India's high growth story.

High Energy Costs, currency depreciation and disturbed exports.

Our GDP growth slipped slightly from 7.4% to 7.2%.

Fiscal Deficit swelled to 4.7%-5%.

Migrant workers returned home from the Gulf Region due to slowing regional trade and rising costs.

Also, if we see the market levels, 24th September 2024 was when the market reached its all-time high of 26,261 levels, and on the same day Nifty Mid Cap 150 was 22,367 and Nifty Small Cap 250 was 18,380 respectively.

Since Donald Trump has resumed office, FIIs (Foreign Institutional Investor) have also been on a selling spree in Indian markets. They roughly sold off $57 billion (Rs 5.5 lakh crore) from Indian Equities. FIIs once had 21% ownership in Indian Equities but now have fallen to 16%. They have sold too much and diverted the same to AI (artificial intelligence) and semiconductor-related stocks and economies. This made economies like Japan, Taiwan and South Korea FIIs' favourite.

Kevin replied, "I know this, Mahendra, I am aware of all the economic activities which are happening around. I was not aware of these numbers. Thanks for that. But when do you think all this will be over and the Indian market will start performing?" (In simple terms he wanted to know, "Market ka kya lagta hai.")

But What About Your Portfolio?

"Two things, Kevin, that you need to note here about your portfolio," I replied.

"First, your asset allocation and time horizon are both already in place. So, why are you so worried? We had done your risk profiling and individual goal planning. On that basis, your asset allocation is done in different asset classes like Equity, Fixed Income and Gold. In the recent past, we have made good returns from the gold rally which has just happened, although our gold allocation was 10-15%. But if you see the portfolio returns, we have decent double-digit returns. Your goals are far away, and we have allocated money into equity to achieve far away goals. For your short-term requirement, we have funds in fixed income as well as Hybrid funds — debt oriented. Also, our emergency funds are in place. So you need not worry about that."

To put that in perspective —

Emergency Fund — Check

Annual Premium Fund — Check

Annual Retreat Fund — Check

Second Home Fund — Check

Children's Higher Education Fund — Check

Retirement Fund — Check

"Your portfolio is very well designed and structured keeping everything in mind."

The Market Doesn't Owe Us Constant Returns

"Look, Kevin," I continued.

"The market doesn't owe us constant returns."

I explained further, "Equity markets do not always stay in a raging bull run, but what we saw after Covid-19 was that raging bull run, which halted in September 2024. The Indian markets had become quite expensive; the PE ratio of Nifty 50, Nifty Mid Cap 150 and Nifty Small Cap 250 was 24.3, 42 and 32. The growth did not sustain as the draconian tariff followed by war impacted our growth story.

But there is a silver lining to the cloud now. As we speak, Kevin, the Nifty Mid Cap 150 has already touched its all-time high, followed by Nifty Small Cap 250 at 23,514 and 18,428 levels. Nifty 50 has been struggling as it comprises 22 sectors, out of which Power & Energy, PSU Banks & Metals and Automobiles have been the outperformers. Oil & Gas, Private Sector banking & FMCG are the worst performers. Big names like HDFC Bank, ITC and Asian Paints have not participated in the growth. Nifty IT has been down 25% since August 2024. Overall, this has led to the struggle."

The Real Investment Test: Discipline & Patience

"Kevin, it is just a matter of time now, that the Indian giants will wake up and participate in India's Growth Story. Going forward, we not only have to see Nifty but Nifty 500, as this will show the complete picture of the Indian Economy. The real test as an investor happens only in a down market or sideways market. Currently, the markets are sideways for almost two years now. That's the real test of patience. This is the time to show discipline and not do anything impulsive."

"So, Kevin, are you relaxed with the explanation that I have given?" I asked.

"Indeed, Mahendra," Kevin replied. "All my doubts are cleared. Your explanation was quite on point."

"But along with this, Kevin, you also have to practice discipline and patience."

"Of course, Mahendra, discipline and patience — the key to successful investing."

Just as Kevin has promised to remain disciplined and patient, I invite my readers to do the same.

#HappyInvesting