So you want to invest for the long term?

Bridgewater recently published some research on how geographical diversification can save our asses. The research is really detailed and has some amazing data points.

2008 was the biggest crash of our generation. But little did I know, that there were far bigger crashes that made 2008 look like a kiddie party.

Geographic Diversification Can Be a Lifesaver/Bridgewater

Speaking of crashes, this got me thinking about another article. Livemint recently published data from CAMS on the makeup of new mutual fund investors in FY19. Apparently, 47% (1.7 million) of new clients who started investing were millennials in the age bracket of 20-35. Well, that’s good news, we need more and more millennials to invest.

But and yes, there’s always a but! 86% of these transactions originated from advisors, distributors, and banks. There are hardly a few 100 advisors (RIAs) in India, and this channel isn’t an issue. The problem is with the banks and distributors, where commissions matter more than selling the right product. Also, knowing our banks and distributors, they would have sold the shit out of it.

Now, these snotty lil pretentious millennials haven’t seen a market crash yet. Most of this generation was way too young to realize what was happening during 2008. Which begs the question will they stay invested when the next market crash inevitably happens?

Nifty was down over 55%, while the mid and small-cap indices fell by over 60% and 70% respectively at the peak of the 2008 crash. Will the lakhs of investors who are self-directed, sold, scammed, and browbeaten into investing remain invested as their portfolio are down in the gutters? My guess is hell no! But I sure as hell hope I’m wrong.

If you have a weak heart and are reading this here’s what happened after.

But the question is can you wake up one day and be okay with seeing your portfolio cut in half? If yes, equities, in the long run, have always done well but you have to sure what “long-run” means to you. But if chances are that you’ll wet your pants if you saw a 50% drop, then hire a registered investment advisor (RIA), not a distributor or your LIC uncle and let him be the grown-up on your behalf.

Posted by Passivefool

A passive investor at present who was actively scammed once. Seduced by the humble beta, preaching to the choir now.

One Reply to “So you want to invest for the long term?”

  1. 20-35 is such a long range. Being 35 I was there when 2008 crash happened. I am sure 30 aged people also would at least know that. Of course if these people are investing for the first time then they would be unaware of the risks. Also it is fair to assume that if market crashes, most both old and new investors will run away. Why single out only millenials.

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