The FOMO effect is catching up with the Indian retail, which is evident from the number of new DMAT accounts opened since the lockdown started, and the uptake in the daily trades, where leading discount brokers claim that they process 5m to 7m orders a day.
Where will this lead to? Looking at the international markets, we have quite a similar trend, where due to lockdown, online penetration and given options, retail does not want to miss out on this opportunity. Equity markets since June are on an upward swing, showing a V-shaped recovery, hence giving boost to the participants equity and a cascading effect on the new word-of-mouth traders 😉.
The only difference here on the FOMO effect, is the quantum of money invested, where retail participation will go from tens of thousands to few lacs, as it comes from the monthly savings and not cash-in-hand or liquid funds (unlike a HNI client). Even though returns may be way higher on the lockdown investments or even the trading, but the long-term effect will eventually rule on the final returns, i.e. 10 years from now, time will decide and average-out the returns (which is hard to digest).
Ultimately, for a retail participant, it’s not the euphoric moment or even the entry point of investments, which will dictate the high returns, but the time horizon of the investments, i.e. how long one can remain invested, and also, how often one invests (Power of SIP).
A famous quote from Warren Buffet, who turned 90 recently: “Someone’s sitting in the shade today, because someone planted a tree a long time ago.”
Picture Credit: IndianFolk