Note to Investors – January 2019

Wish everyone of you a wonderful, healthy, prosperous and peaceful 2019!! Thank you for all your support over the years during this journey of wealth creation and we look forward to partnering with you over the long run to achieve your goals.

2018 was certainly an action-packed year dominated by macros (oil prices, currency) and government policies (long term capital gains on equity, mutual fund scheme categorization etc.).

In 2019, various macro queries persist – the general elections, global tariff wars, RBI governor change etc. How would all this impact the long term returns of our investment portfolio? As we all grapple with these queries, let us take a quick look at the 2018 results and the way forward

Quick Recap of 2018

After a steep rise in 2017 the markets were muted in 2018. While the large cap index gave 5% returns the mid cap & small cap indices had actually fallen around 15% and 30% respectively.

While the Indian markets have fallen, globally equity markets fell even more with an average 9.5% drop while Europe and other Emerging markets fell by 12 to 15% in local currency. Do take a look at these returns worldwide.

Several individual stocks had much steeper falls resulting in steep corrections in mid and small cap stock valuations. For individuals those who had significant holdings in large caps the fall was cushioned. This highlights the importance of fund allocation within equity also.

Investing in 2019

2018 was the year when volatility made a return and 2019 promises to be no different!! The correction in market along with the improved macros (falling crude oil prices), this has made long term investing more attractive in the long run.

• Brace yourself for volatility in the short runas India faces general elections in 2019. Historical data shows that the election have some impact in the short run and minimal impact in the long run as shown by this research paper
• 2019 will continue to be the year of investing via the SIP and STProutes
• Mid and Small cap fundshave generated wealth for investors over the long term and will need to form an integral part of our portfolios.

As always, the golden principles of long term investing namely, appropriate asset allocation, investing in high quality companies, adequate risk management and ignoring the noise will pay rich dividends for all of us in the long run. The ability to manage our emotions and behavior is the key to long term wealth creation.

Here is wishing you a great investing experience in 2019!!

Venkat and Prasanna