The elections are drawing to a close and there is a lot of speculation about what the outcome will be. To be honest, no one knows anything (or can predict with 100% surety) but people do have strong opinions which at times masquerade as predictions.
Nevertheless, the election results can create short-term volatility and uncertainty in the market and as investors, it is natural to be concerned about the potential impact on your investments.
I have been getting a lot of queries from investors like “should I continue with my investments or I should change my strategy?”
I wanted to address these concerns with this note.
First things first – Stay calm. This is not the first election that markets are witnessing. And this is not the first time markets are jittery due to election results. And while analysts will try to drown you in historical data about patterns in market movements in and around elections, if you look objectively at the historical trends with a fresh set of eyes, it would become clear that the equity market’s performance are not very consistent across different elections and their results.
One of the leading market publication (Moneycontrol) quoted me recently – “In times like these, there is an urge among investors to try and ‘position’ their portfolios to best fit the election results. But as tempting and logical as it may sound, the fact is that nobody knows the future and no one can predict anything, let alone something unpredictable like the elections.”
So what to do?
Don’t forget your financial plan. And instead of reacting impulsively to the election verdict, it is best to focus on your real-life long-term financial goals.
Regardless of the election outcome, stick to your asset allocation for different goals and if need be, rebalance when it gets out of your comfort zone.
Your financial discipline, a high savings rate, proper asset allocation and ability to remain invested for the long term will decide your financial future and not the election results.
Many new investors who came in markets in the last 5 years have never actually experienced different market phases. So while they may choose not to listen to me, I can only offer one piece of advice that they should stop worrying about market trends. And if you have been wise enough to be investing based on a proper financial plan, then do not deviate from the same and stay the course.
Staying calm without being swayed by the surrounding noise is the best approach for retail investors. “While those sitting on the sidelines with a large surplus may want to wait a bit more for clarity about continuity in the government / policies, etc, others should carry on with their investments regularly and without too much deviation. Occasional tactical bets are fine, based on your short-term views. But don’t try to change your long-established investment approach overnight because of election outcomes,” from my quote in earlier mentioned publication.
In my view, India’s long-term economic growth trajectory remains strong, irrespective of what happens every few years in the political landscape. India’s growth story remains intact and any election outcome, wouldn’t meaningfully alter that outlook in the medium to long term.
Many may not agree (especially traders) that in markets, your staying power can at times turn out to be your superpower. Most people don’t have the patience to stay put. But if you are genuinely investing for the long term, and stay long enough in the right place, then you will eventually win.
And even if for some reason the markets correct 10-20%, then remember that India is the place to be in the global landscape and any correction, would not last very long. So, while a setback can happen any time, rest assured that a bigger bounce back is almost inevitable!
So stay put and keep investing. And keep calm. It’s a super power!