In our last letter we discussed about FOMO (Fear Of Missing Out). This time lets know about FOBI, it’s sibling. FOBI is the exact opposite psychological situation of FOMO as it occurs when you’re Invested but are fearful that the market will go down or correct or crash and take away all of your gains or capital etc.
“Risk hai toh ishq hai” has taught us well that investments are subject to market risks. Our job here is to maintain the equilibrium between these two predominant psychological states, where one (FOMO) represents the Greed side and the other (FOBI) is about Fear. As investing is essentially about managing Behaviour & Biases, both of these would impact you, especially if you tend to time the market or continuously have different opinions about the market. Both are equally dangerous as they can lead to irrational decisions which can be regrettable later and harmful for the investment health. And everyone gets them at some point or other no matter how experienced.
Now, the question is WHY this fear & how to deal with it? A simple analogy will make things clearer for us. Price is a slave of Earning. In the short term, sentiments can overrule fundamentals, but ultimately earnings drive the prices. So, one has to be convinced with the fact that Equity as an asset class can be very volatile across time periods, but ultimately in the long term it is probably the best way to participate in the wealth creation journey.
Managing the volatility is also equally important as it is in such beyond normal times that one resorts to unreasonable decisions. Hence, the ideal way is to keep our focus on the longer-term goals & manage the intermediate fluctuations through ASSET Allocation & diversification.
| 01 Jan, 2008 | |
| Name | 31 Mar, 2021 |
| SBI Blue Chip Fund-Regular Plan-Growth | 8.85% |
| Aditya Birla Sun Life Frontline Equity Fund-Growth | 9.69% |
| DSP Top 100 Equity Fund – Regular Plan – Growth | 7.66% |
| IDFC Large Cap Fund-Regular Plan-Growth | 6.60% |
| HDFC Top 100 Fund – Growth Option | 9.58% |
| UTI – Master Share-Growth Option | 8.28% |
| Nifty 50 | 6.78% |
The above data points indicate that even if one enters into an investment at peak of a cycle, still staying invested for longer results in a reasonably positive outcome.
Hence, few Do’s & Don’ts can be listed out as below:
- Do not try to time the markets in an absolute sense, staggering can be used to address volatility though.
- Magical Wealth creation through equities requires patience & conviction from the investor.
- Asset Allocation & diversification play a key role in investment.
- Managing emotions in turbulent times is key to investment success.
Happy Investing!
Team @ MintBox Advisory
DISCLAIMER: PLEASE NOTE, THE ABOVE NOTE IS FOR INFORMATION PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS INVESTMENT, TAXATION, AND/OR LEGAL ADVICE. MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME-RELATED DOCUMENTS CAREFULLY.
Mutual fund investments or Investment in securities market are subject to market risks. Please read the scheme information and other related documents carefully before investing. Past performance is not indicative of future returns.
