{"id":18126,"date":"2020-03-19T14:00:22","date_gmt":"2020-03-19T08:30:22","guid":{"rendered":"https:\/\/www.fundsindia.com\/blog\/?p=18126"},"modified":"2020-03-19T13:37:11","modified_gmt":"2020-03-19T08:07:11","slug":"things-under-our-control","status":"publish","type":"post","link":"https:\/\/www.fundsindia.com\/blog\/mf-research\/things-under-our-control\/18126","title":{"rendered":"Things under our control"},"content":{"rendered":"

The last few weeks have been pretty tough for most of us.<\/span><\/p>\n

At the current juncture, while <\/span>\u2018Be Patient\u2019<\/b> remains the best time-tested advice, let us be honest. This is far easier said than done.\u00a0<\/span><\/p>\n

Given the sharp declines in the equity market, there is a high likelihood of hasty decisions in panic, which can have long-term repercussions on our future goals and portfolio returns.\u00a0<\/span><\/p>\n

During times like these, while no one knows when it will end, there is a simple takeaway from studying past market corrections –\u00a0<\/span><\/p>\n

Inevitably equity markets<\/b> have <\/span>always recovered!\u00a0<\/b><\/p>\n

Napoleon Bonaparte had a great definition of a military genius –\u00a0<\/span><\/p>\n

The person who can do the average thing when everyone else around him is losing his mind.<\/span><\/i><\/p>\n

This is exactly what is required from us at the current juncture.<\/span><\/p>\n

If we can think through this and approach the correction with a logical plan, then the current decline can actually be a great opportunity to improve our overall long-term portfolio returns.<\/span><\/p>\n

How do we do this?<\/b><\/h4>\n

Let me attempt to address this via answering several questions currently running in your mind…<\/span><\/p>\n

Will markets continue to fall in the coming days, weeks, months? To what extent will they fall and when will they finally recover?<\/b><\/span><\/p>\n

To predict the outcome we will need to know the answers to…\u00a0<\/span><\/p>\n

    \n
  1. How quickly a vaccine can be created for Coronavirus, where will the virus spread next, and most importantly, how quickly can the virus be contained?<\/span><\/li>\n
  2. What will be the economic impact on different global economies and India?<\/span><\/li>\n
  3. Where will oil prices settle and how will the current lower oil price impact the global economy and India?<\/span><\/li>\n
  4. What will be the government and central bank action to stimulate the economy both globally and in India?<\/span><\/li>\n<\/ol>\n

    And assuming we luckily get all the above right, here is the final part we need to predict…<\/span><\/p>\n

    How will millions of investors with different goals, perspectives, risk appetite and time horizons react to all the above?<\/span><\/i><\/p>\n

    Given the fact that no one predicted Coronavirus two months back, we would reiterate our humble view – <\/span>No One Knows<\/b>.\u00a0<\/span><\/p>\n

    There is no way to predict markets in the short term. There are simply too many moving parts and to predict each and every one of them consistently is next to impossible.<\/span><\/p>\n

    So if we don\u2019t know what the markets will do over the short term, how do we act?<\/b><\/span><\/p>\n

    In times of extreme noise, we prefer taking the \u2018first principles\u2019 approach and going back to the fundamentals.\u00a0<\/span><\/p>\n

    There are three things which drive market returns over time.<\/span><\/p>\n