These days when I have a meeting with a client am a little worried. During the review the talk veers to the poor performance of Equities funds over the past 1 or 2 years and near lack of visibility of when the economy or stock markets will see an improvement. So even the client who does not need the money for the next 10 years, wants to pull out the investment to avoid looking at the poor performance of his investments.
While I take pains to explain that the next 3 years returns promises to be better based on the Market Capitalization/ GDP ratio currently of the stock market? Yet the invariable request am left with is for the client to pull out part/ whole of his equity investment , with the promise to return when the markets appear better.
However it is exactly at these times that one must be looking at investing and staying invested, Equity markets are forward looking creatures and they would soon sense a recovery in the economy and also move up ahead of the actual economic recovery. However one must have the ability to stay rock solid with the investment. Unfortunately most of us are tuned to managing our investments using the rear view mirror,i.e the past tends to weigh more in decision making as compared to the future , which though uncertain holds greater meaning for our portfolio.
In my humble Opinion, FUTURE Returns in Equity Mutual Funds will always be inversely correlated with your current confidence on Equity Funds. So if you are damn confident Equity Mutual Funds won’t do well in the next 3 years.. exactly the time to stay invested in the markets to earn a super duper return.