Geting Sucked into the Markets

                                   Happy Bhogi! Let this be a  Properous Year for all us as we plough the seeds of hard work and seek a good harvest!

                    Between Pongal last year and this year, All major Indices of the Indian Stock Market has performed generously, the Nifty 50 has given a return of 21%, the Midcaps have given 51% and small caps gave a more outrageous return of 60% ! and apart from these few select indices like Pharma & Auto returned 37% & 46% respectively. All this in just one year! 

    As if this bait is not enough ,the SIP returns since the end of Pandemic look even more extra-terrestial ranging from 33% to 23% yearly! 

What do you do now?

EXTRAPOLATION 

        Lets us explain this a bit, Human Mind is more devious that we think it is and is always ahead of us! So Even before we have thought about it, the Mind has calculated and it tell you that 

• @ 30% return, Our invested money doubles in 3 Years 
• @50% return, Our invested money doubles in 2 Years
• @60% return, Our invested money doubles in Just 18 Months (compounding n all starts getting accounted here! funny way our mind works) 
• And If we invest in FD, it will take N-I-N-E YEARS for our money to double! 

By that time, If I take the 3rd option, then I will have 16 times of the money I invested! Assuming I have 5 lacs in FD or Provident Fund, then in 9 years, the money will grow into 80 lacs! Generally the story does not stop here! Because your mind is now telling you that 80 lacs is not enough, you need atleast 2 crores to be "safe" in future. So It asks you to find "source" for another 5 lacs so that in 9 years with 2 Crore rupess, YOU RETIRE! 

OH! you retire?!? Thats some climax I had say! Your devious mind, Mind You!!! 

Where does all this lead to?

                        Sucking your short term money into the Markets with a wrong expectation. Given how the mind plays its trick on you, we get lured into investing our short term money in to the market and expect miracles to happen. A point in case being one of our clients who does a SIP of INR2,000 has started doing lumpsum purchase of about 60,000 monthly over the past 8 months. Mind you his SIP return is a staggering 37% yearly. You see, we are not lying. Mind always has one up the sleeve. Of course, we have a few more clients who do some random purchases when their impulse get triggerred but thankfully we have been able to insert logic into them and helped them avoid jumping the plan. 

Whats the Problem in Investing Short Term Money?

                     Well the odds are stacked against us if we invest in short term. A recent study in the industry reveals that 

• If you want 5x return in 5 years' time then there is only 4% chance it will happen
• Similary, In 5 years' time, there is only 36% that your money will even double

So if you invest with wrong expectation, there are chances that you will be disappointed and leave the market with little bit of loss and lot of mental bruises. 

On the Contrary

If you expand your time horizon

• For every 11 years, there is 80% chances that you will make 3x money
• For every 15 year, there is 96% chances that you will make 4x money. 

Before we wind up, we wish that you plough practical and sensible thoughts about creating wealth when it comes to investing your hard earned money so that the harvests are healthy enough to make you enough wealthy. 

Advance Pongal Wishes

For any financial Planning queries, Please contact Droplet Wealth at invest@dropletwealth.com.