#BeResilient Through Highs and Lows

HOW TO MAKE VOLATILITY
YOUR FRIEND

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The S&P BSE Sensex touches an all-time high of 38,896 points on 28 August 2018 but then quickly drops to 33,349 points on 26 October 2018 (a 14% fall) on macro-economic concerns like the falling rupee and rising crude oil prices. However, as the macro factors start improving, the index climbs back 9% to 36,194 points on 30 November 2018. This sharp fluctuation of the market benchmark index is termed as volatility.

Investors love it when the market takes a one-way street which is upwards. However, they are concerned when the market enters a volatile phase and slows down or declines. But, is this volatility good for investors? The explanation is that, volatility is to equity what oxygen is to life, i.e., the two cannot be separated. Instead we must learn ways to live with volatility and gain from it, if we recognize the higher returns potential of the asset class (equity). Here is a short and interesting video we would like you to watch which explains how volatility can be your friend and how you can benefit from it.


The toughest challenge investors face is to stay invested for longer periods as they are unable to ring-fence themselves from the negativity about volatility that they see, read and hear during such periods. This video could help you overcome this challenge.

A back of the envelope calculation reveals that despite multiple negative cycles seen by the equity market, the Sensex has managed to return 16% annualised gains (close to 300 times growth) over its 38-year history since January 1980^. Does this encourage you to stick to your SIPs (Systematic Investment Plans) in equity mutual funds for say, perpetuity and let the next generation too benefit from your wisdom? Think about it.

^Performance of S&P BSE Sensex till November 30, 2018. Data Source – CRISIL Mutual Fund Research Tool

Disclaimer: All figures are for showing past trends in market only and may or may not be relevant in future. Actual results may vary.

An investor education and awareness initiative by Franklin Templeton Mutual Fund.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.