Is it already time to take out family silver?

Convention wisdom says, “if you can see a financial crisis approaching near you, make an assessment of your resources well in advance.” This preparedness involves getting the disposable assets valued at realizable value.

In the past one week, I have received several messages indicating that the investors are sensing a crisis approaching near them. The confidence is shaken. The argument has shifted from “this is a temporary blip; long term India story is intact” to “alas! even a fixed deposit would have yielded better return”.

They have taken out their family silver and are assessing if they should still be owning it. Stock holding cherished for decades, viz., HDFC Bank, TCS, Asian paints, Hindustan Unilever, Infosys, Kotak Bank, etc., are being evaluated as these have yielded no or negative return over the past five years.

Also, the never-ending debates like “buy & hold vs flow with the current”; “large cap vs small cap”, “active investment vs passive investment strategies”, “direct investing vs mutual funds” have returned to hog the headlines. The social media timelines are inundated with investing memes, suggesting that several of “active investors” and traders have suffered material losses or sub-optimal returns in the recent months.

For record, the benchmark Nifty50 has yielded an ex-dividend return of 8.7% CAGR for the past 5 years; marginally better than a 5year bank deposit. However, the NSE Small cap 100 index has returned a much better yield of 12.9% CAGR (ex-dividend). Most equity oriented mutual funds have also managed to provide returns in the 11-15% CAGR range. The total return should ideally be not much of a problem for an investor.

The problem lies, in my view, in the fact that most investors were overweight in the stocks which did very well historically but have yielded no return in the past five years. They did not reorient their portfolios in tandem with the market trends for tax consideration, high conviction in their traditional holdings, and/or lack of market awareness. This has resulted in their portfolios earning sub-optimal returns. The current market volatility and clouded market outlook for FY27 has made these investors jittery. This is even more true for the investors who have low risk tolerance and/or may need to sell stocks to meet their professional or personal requirements.