Hi,

The similarity between viral fever & equity market corrections

Off late, markets have been down.   Portfolio values are also down. Investors have a common question. Will markets recover? Should they sell now? What is the outlook?

Well, rather than answering this question directly, let's use the analogy of viral fever.


How do we get viral fever? Do we know it is coming?
We get viral fever just about anytime. There is no specified timeline. Mostly, we don't know if it is going to hit us. It may happen twice in two months or may not happen for many years. Sometimes, our body gets indications a few days before but we can't do anything about it and we have to face it as it comes. 

(Same with equity markets. We know it will fall but don't know when. It strikes when we least expect it.)

What happens when we get viral fever?
Our body aches. We get the temperature. We don't have the energy to go to work or accomplish pre-defined activities. We like to rest. We lose interest in everything. Many times, we feel we have got some other disease that is fatal. It seems that the end is near and we are fearful. 

(Same with equity markets. When it falls, we feel it's the end of the world and it shall never recover. We see blood in the portfolio. We feel depressed and do not feel like doing anything. We do not like to talk about investing more or increasing SIPs. It feels like our life savings are at risk.)

How long viral fever stays?
Generally for 3-4 days. Some people have it for 7 days. Recovery in a few cases takes a month. 

(Same with equity markets. Generally, markets recover within a few weeks. Sometimes, it takes a few months. Once or twice in a decade, it takes a few years.)

Is viral fever fatal?
Mostly not. Most people recover. In fact, the fatality rate is very low. It means, that even if we feel the end is near, within a few days we recover. In rare cases, some people succumb to viral fever. Mostly those, who have other co-morbidity or did not take rest and other precautions during viral fever.

(Same with equity markets. Mostly, markets recover. Sometimes, the damage is more and it takes a longer time. Unless we panic, chances are high that the portfolio will come back to previous peaks and even higher. Some people never see their portfolio recover because they take leverage, sell at the bottom or do several transactions to beat the market. Those who take a rest, give time to the market, and respect it, ultimately win.)

What to do during the viral fever?
It’s not the right time to experiment with things. Take rest. Take vitamins and medicines as prescribed by the doctor. Make new resolutions about the future. Pray and commit yourself to a healthy lifestyle going forward.

(Same with equity markets.  When markets fall, be watchful but don’t do anything silly. Buy at lower prices. Increase your SIPs. Respect the market and commit yourself to being a more disciplined investor in the future.)

Happy Investing !!