The global equity markets have seen one of the biggest and fastest bear markets. Many of us have invested a significant amount of wealth in the Indian capital markets and have been experiencing significant losses in recent times unless it is managed prudently with good investment discipline.
One of the major questions every one of us has during these times is “What was the investor journey from start to end of previous bear markets?” We looked at actual NIFTY50 data and felt it would be easier for retail investors and our clients to better understand bear markets and their journey during those times.
We took five different historical instances since 1990 for NIFTY50 and marked
- Date and Peak price of NIFTY 50 till that time
- Date and Price when NIFTY50 entered a bear market (more than 20% fall)
- Date and Price of NIFTY50 lowest point before recovery
- Date and Price of NIFTY50 at its previous peak point recovery
The critical things to observe here is the number of days between these different phases of bear markets and the returns on investment. The table has different instances where NIFTY50 significantly entered the bear market phase and the time it took to regain that peak level.
During the 2000 tech bubble burst, it took close to 4 years to regain the peak level of NIFTY50 after losing more than 50% of the price. During the 2006 bear market, it took less than 7 months to regain its peak level after losing close to 30% of the price.
On the losses part, during the 2008 Great Financial Crisis, NIFTY50 lost close to 60% of its peak price in less than 10 months from its peak. During the 1992 bear market (we agree that they were different times) the bear phase itself saw a freefall of close to 45% from the peak price of NIFTY50.
The main intention behind talking about all this data is that bull and bear markets are a common phenomenon of capital markets and investments. Though it is common, as financial advisors and wealth managers we know the importance and the sensitivity of losing the value of investments and should be dealt with the utmost care and prudence.
Bear markets can be handled well with taking wise and well-informed decisions driven by actual data, strong research and experience in investment markets.
For investors who are very risk-averse should have never had more than necessary equity market exposure in the first place. Wealth management and Investment management decisions should start at deciding the appropriate asset allocations then lead to investment choices so that the investor money and financial goals are achieved appropriately.
(In one of our blog’s we have explained it in detail about the asset allocation and wealth management during the market’s breakdown)
Having a professional and wise investment advisor helps take better or avoiding capital inappropriate capital erosion or wealth loss during bear markets.