2008 Market Crash and People's Reaction

Currently Indian market is in bull phase and the new investors are happy by seeing the growth of their investments. They are hoping that the bull phase will continue forever. 

The idea of this post originated from the discussion about the actions people has taken during the 2008 market crash on Facebook Group “Asan Ideas for Wealth”. 

In 2008 market crash almost all fund’s NAV dropped significantly. People who are sitting on huge profits suddenly found that now they are sitting on losses. After seeing the market crashed some people stopped investment, some people redeemed their funds and some people continued with further investment.
 

Let’s try to see the above mentioned three cases and will see their current situation. 

Here are the details for the calculations:-

SIP start date	1st Jan 2004
Mutual Fund	HDFC Equity – Growth
SIP Amount	5000
SIP Mode	Monthly (1st of every month)

At the end of year 2007

HDFC Equity - Growth
SIP Start Date	1-Jan-04
SIP End Date	31-Dec-07
Total Amount Invested	240,000
Worth of Investment	582,255
SIP CAGR	49.07%

Bear started in year 2008 and the NAV of the fund starts declining day by day as you can see the below graph. 

Let’s see how people reacted to bear and the result of their action.

CASE 1 Sell all the units at the end of the year 2008 

HDFC Equity - Growth
SIP Start Date	1-Jan-04
SIP End Date	31-Dec-08
Total Amount Invested	300,000
Worth of Intestment	318,065
SIP CAGR	2.38%

  

CASE 2 Stop SIP at the end of the years 2008 and hold all the units till 30^th Jun 2014

HDFC Equity - Growth
SIP Start Date	1-Jan-04
SIP End Date	31-Dec-08
Total Amount Invested	300,000
Worth of Intestment at 31st Dec 2008	318,065
Worth of Intestment at 30th June 2014	851,205
CAGR (from 1st Jan 2009 to 30th Jun 2014)	19.22%

CASE 3 Continue the SIP

HDFC Equity - Growth
SIP Start Date	1-Jan-04
SIP End Date	30-Jun-14
Total Amount Invested	630,000
Worth of Intestment at 30th June 2014	1,849,337
SIP CAGR	19.62%
SIP CAGR (from 1st Jan 2009 to 30th Jun 2014)	20.22%

As you can see from above calculations those who have patience and invest for long term will not get affected by bear market.

If we see the history of market, it is clear that bear or bull is not permanent. For many people bear market is the opportunity to purchase the good funds or stocks in cheap price and creating the base so that they can the advantage of bull run.

 Please do share you views.

Disclaimer 

“I am not an investor of HDFC Equity Fund. Please do not consider this post as the recommendation (purchase or not to purchase) of HDFC Equity Fund.”