How the “unluckiest investor” fares in the long run 

Investing in the stock market for the long term is safe and rewarding, says Monika Halan, a prominent personal finance writer and television personality. 

In a conversation with businessline, at the HinduLitForLife event here today, Monika took the hypothetical case of “the unluckiest investor” to illustrate her point.  

Suppose there is an unluckiest investor, who always invested ₹1 lakh at the 52-year-high level of the market each year, for 30 years. Each time after she invested, the market would fall. What would be the value of her holdings at the end of 30 years? ₹2.3 crore. 

In the long-term, markets smoothen volatilities, she said.  

Halan is the author of books like Let’s Talk Money, Let’s Talk Mutual Funds and Seven Steps to Financial Freedom: A Family’s Guide, is also the Chairperson of the Advisory Committee for Investor Protection and Education Fund. 

Answering a question on the possibility for price manipulation (by speculators), Halan said that such a possibility might have existed when the market size was small. But at the current level of market capitalisation, and given the work that the market regulator, SEBI does, “I’d be very surprised to see any systemic risk to the market,” she said. 

She agreed with Aarati Krishnan that each time the market went up, people would think of it as a bubble and a massive fall would happen. “Market is not a bubble, though it may go to the bubble territory at times,” she said, pointing out that in a growing economy, the market should be expected to go up because the market actually reflects the growth of the country’s economy. Halan recalled that when she was a “research trainee” with a business magazine in 1992, the Sensex touched 2000, and people thought that was it. Such sentiments popped up each time the market reached a peak. She stressed that while the market could be dangerous in the short-term, over a long period of time, it is a wealth creator. 

For the young, Halan had an advice. Calculate your annual spends today, index it for inflation to see what the same spends would be when you are 60 years of age. Multiply that number by 26—that should be your corpus. 

Halan was skeptical about life insurance policies as a good investment. She said that mutual funds were a good way of staying invested in the market. She herself had all of her investments in mutual funds only, she said. 

Answering a question about the right extent of regulations, particularly in the context of SEBI’s cautioning that 90 per cent of those who deal in derivatives lose money, Halan said she did not want India to be a “nanny state”. The question before the regulator was to warn the investor of the risk and leave it to him to decide whether or not to disturb. She said it was like putting up a warning board on the beach cautioning swimmers about the presence of sharks in the water, but you can’t stop people from swimming.