Several people have been asking me and hyping the fact that it’s a big deal that markets have fallen 1000 – 2000 points in a day. If you put things into perspective, in percentage terms, these have been about 6-7% falls which have happened many times in the history of the markets.
Markets reward patient long term investors. There’s no better way of making money other than owning a great bunch of Indian companies and ignoring the inevitable ups and downs of the market. Owning stocks over the long term is a sure shot way to success! In about 20 years from now, 1000 points drop will probably look like a small 1-2% blip.
Good stocks and funds appreciate over time and reward investors in a long term period.
Let’s take a few examples, if we look at TCS even during the Great Recession of 2008, it had fallen over 50% over a period of 2 years! But despite that, it bounced back from Rs.125/share to highs of 2284 by delivering a whopping CAGR return of 30% in the past 12 years. Or even if you look at Bajaj Finance, even though it fell over 80% from 2007-2009, it has been nothing but a wealth creator.
Hence, a pandemic is a one-off which will, in fact, create an opportunity for investors to create wealth over the next 10-12 years. And we know for a fact that such quality companies will create wealth because even after a sharp decline they have shown strength with their stock prices always inching higher. In the long run, when things are under control, markets will recover and the same businesses will be fairly priced again.
If we consider our everyday utilities, despite a slowdown we won’t stop consuming toothpaste or shampoo. This is exactly where companies like Hindustan Unilever or Colgate come into the picture as they will continue to create wealth as they have been in the past.
The author is Anuj Tyagi