Things are really bleak. Most investors haven't made any money in the past five years from the market. That is why it is very difficult to convince them about the long-term prospects of equity at the moment," says the head of a large mutual fund in a rare moment of candour.
"If they are willing to listen, I can still try to convince them that the current trend is an exception, not the norm. Probably we are witnessing one of the darkest periods in history," he adds.
There are many market participants - investment consultants, mutual fund officials and distributors, financial planners and so on - who share his bleak view.
The trouble is the situation is partly their creation. Not long ago, the same people were telling investors that long term means three years in the market. And they would also add in the same breath that stocks would beat all other asset classes in the long term.
Investors interpreted the message like this: if you invest in stocks for three years, you never lose money. In fact, you make a pot of gold.
However, things have changed. Investors are not so naive anymore. They have seen that their investments haven't returned anything in the last few years. As for the experts, they can't offer the same lines anymore to the harried investors who have lost or at best made single-digit returns from the market in the "long term".
Worse, some of these investors are not even ready to listen to any amount of reasoning. They have mostly made up their mind that they are better off with conventional investment avenues like bank deposits, bonds and so on. They have already parted company with the stock market or are in the process of doing so.
The trend was in the making for a long time, confirmed by outflows from mutual fund schemes and the lower number of systematic investment plans (SIPs) in the recent past.
"Yes, we face similar questions. But I try to tell them that they are speaking with the benefit of hindsight. But we didn't know at that time that the stock market would behave this way or the bank FDs and bonds would give this kind of returns," says Suresh Sadagopan, founder, Ladder7 Financial Advisories.
"Despite so many point-to-point comparisons doing the rounds about underperformance of equity, long-term historical data proves that equity beats all other asset classes. So the theory that you should take the stock market route to meet your long-term goals still stands," he adds.
How long is 'long term'?
That brings us to the million dollar question that investors are asking the so-called experts: How long is "long term".
"I believe five years can be counted as long term, even in the current scenario. I try to make them understand that they shouldn't panic at the current situation because this is highly unusual. Typically, we see the Indian stock market moving cyclically every three years," says Hemant Rustagi, CEO, Wiseinvest, a wealth management firm.
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'I made my money by selling too soon.'
Website: http://indianmutualfund.co.cc/
Blog:http://indianmutualfund.wordpress.com/
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