During the colossal market crash of 2008, many investors lost their wealth. That phase led to negative sentiment towards equities in most Indian hearts. People lost their conviction towards equities, they sold off whatever shares they had, booked huge losses, and directed their money towards fixed income securities.
But then slowly, the bruises started to heal, the markets started to revive, and people gradually developed confidence in the markets once again.
And in the mid of all this chaos, the ones who were calm, who did not sell when the prices went down, who waited for the storm to pass, who were optimistic about the future, were the ones who gained.
The Sensex is celebrating the Indian economy's success and is at its all-time high. And amidst this air of positivity, there are two types of pessimist investors, you have to deal with. Their bruises have healed, but the marks are still there which makes them panic at every other news in the market.
1. Those who want to sell, because they have made profits on their investments: These are your existing clients, who invested some time back, they are super happy to see their gains since the markets took a steep upsurge recently. They might or might not have invested in equity or mutual funds for certain goals, but now since they have made profits, they want their money back, they want to feel the contentment which has been bestowed onto them by the harvest on their investment. They believe that this is the peak, and if they do not redeem now, they may not be able to yield this much tomorrow.
So as their advisor, you must hold them from falling prey to their emotions. You should explain to them that:
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Until they are not in dire need of money or it's time for a goal to be fulfilled, they shouldn't encash their investment.
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Lastly, make your clients realize they are investors and not speculators. They are here for the long haul. They are not the ones who dived in to be gratified by short term nominal gains, rather they should crave for more by being invested for the long run.
2. Those who do not invest, because they believe that it would be expensive to invest at market highs: Many of your prospective clients or existing clients may also be of the view that “since the markets are so high, the cost of acquiring investments would also be high, so let's wait for some time for the markets to fall and we'll invest then.”
So, for these investors, you have two options:
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One, you explain to them that there is no right or wrong time to invest. You never know, the markets may never take a U-turn, so if that happens and the investor procrastinates his purchase decision to purchase on the notion that markets will fall, will end up paying extra money later.
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Two, SIP is the solution to all problems. Whatever happens in the world, just keep paying your SIP installment. At the end, your total cost will be averaged out, no good or bad will have a significant impact on the acquisition cost. The Power of compounding will help your money multiply of the years.
Your clients panic because they have had a bad investment history, they panic because they get influenced by the TV anchors who propagate that markets are at their peak and a fall will begin very soon. The true role of a financial advisor comes to play at such times, your clients need the right advice. You cannot ask them to not watch the TV, or forget the past, but can definitely hold them back, ensure them that the right thing to do is wait and watch their small money create huge wealth for them.
