Indian markets, today are controlled by traders, both domestic as well as FII's. Even our TV Channels also promote day trading in the form of T20 matches every day, thereby compounding the market falls or more so speculative trades. None of them are long term players. All of these players have short term motives and hence, so much of ups and down in the markets. In the long term prices of stocks are ultimately driven by earnings and earnings alone. As explained earlier, money has time value. Similarly, businesses take time to mature and generate earnings. It is just like planting a seed which has a life cycle to first grow and then start producing fruits. There is no shortcut to making money grow. Similarly, every single business has a life cycle, which has to be completed for it to start generating profits.Time is the essence of each and every investment. Remember the rule of 72.
Therefore, one should not be afraid of and let go of falling markets which provides opportunities for accumulation of good stocks. Always keep the list of selected stocks handy and make small purchases whenever the price is right as falling markets provide big opportunities for buying good stocks at a reasonable price. There is no way by which one can generate wealth in the long run. As one puts money in Bank fixed deposits for a period of one, two or more years, similarly one has to stay long enough with good businesses to reap the harvest in terms of profits in the form of price appreciations. Stocks may continue to remain in a fixed price band for years together, but then one fine day it gets re-rated and starts appreciating manyfold in a matter of few days, just like land.
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