Here’s the standard disclaimer from an Indian mutual fund that you must surely have seen:
Mutual fund investments are subject to market risks. Please read the scheme information and other related documents before investing. Past performance is not indicative of future returns. And here’s the equivalent statement of an American fund from the year 2000, which I found via the blog of Jason Zweig, who writes about personal finance in Wall Street Journal. Without further comment, with some editing for length: First of all, stock prices are volatile. Well, duh. If you buy shares in a stock mutual fund, any stock mutual fund, your investment value will change every day. In a recession it will go down, day after day, week after week, month after month, until you are ready to tear your hair out, Stock markets show remarkably a little respect for people or their reputations. While the longterm bias in stock prices is upward, stocks enter a bear market with amazing regularity, about every 34 years.It goes with the territory. Expect it. Live with it. If you can’t do that, go bury your money in a jar or put it in the bank and don’t bother us about why your investment goes south sometimes or why water runs downhill. Aside from the mandatory boilerplate terrorising above, there are risks that are specific to the IPS Millennium Fund you should understand better . Since most people don’t read the prospectus (this isn’t aimed at you, of course, just all those other investors), we thought we would try a more innovative way to scare you. We buy scary stuff. You know, Internet stocks, small companies. These things go up and down like Pogo Sticks on steroids. … While we try to moderate the consequent volatility by buying electric utility companies, Real Estate Investment Trusts, banks and other widowsandorphans stuff with big dividend yields, it doesn’t always work.Sometimes we get killed anyway when Internet and other tech stocks take a particularly big hit. Received Wisdom can turn on a dime in this business, and when that happens prices fall off a cliff.Even if we were really smart and stole these companies, MACD shows 35 stocks are readying for big rally The Nifty50 reclaimed the crucial 9,300 mark on Monday with momentum indicator MACD, showing that nearly 35 stocks have witnessed an upward crossover or bullish crossover on BSE.
Picture abhi baaki hai! Why it’s not the time to go cold on stocks Career & Jobs After Cognizant, other IT also prepare for layoffs Large IT services companies are all in the process of laying off employees on a scale not seen since the 200810 downturn. New: Big Data Analytics Trends Get the 2017 Free Whitepaper Top 10 Trends about Big Data Analytics, Hadoop & More. Get the Free Whitepaper. tableau.com SPOTLIGHT way up we are still as vulnerable as if we were really dumb and paid that high a price for them to start with. … Just so you know. Don’t come crying to us if we lose all your money, and you wind up a Dumpster Dude or a Basket Lady rooting for aluminum cans in your old age. Please email us if we haven’t scared you enough, and we’ll try something else. Both the above disclaimers the dull Indian one and the funny American one are equally correct, of course. However, only one of them is actually useful in communicating any kind of fundamental truth about investing. No prizes for guessing which one. Of course, no prizes also for guessing that the American fund which issued this disclaimer never managed to collect much money from investors. After all, telling the plain, hard, uncomfortable truth is so unusual in the financial services business that investors wouldn’t really have responded to this kind of a statement. But the truth is that if you invest in equities or equity , then you should print out this disclaimer and pin it up on a board.There are two aspects to what it says. Both are summed up in the sentence `While the longterm bias in stock prices is upward, stocks enter a bear market with amazing regularity , about every 34 years’. Every equity investor must take this to heart.
source: wealth forum .com
(The author is CEO of Value Research)