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"In investing, what is comfortable is rarely profitable.” – Robert Arnott

In April this year I wrote that investing in equities had a lot in common with parenting. The market is volatile and it will throw a tantrum every now and then. And you will have to deal with it just as you deal with the tantrums of a child or a teen. Being both a parent and an investor I see the similarities. I also see the difference. Most children eventually move on from the tantrums as they mature and grow older. But the market– it will always remain a teenager. Frequent tantrums are the nature of the market.

“Change is the only constant” is an adage which applies perfectly to not just the macroeconomic environment but also to the equity markets in general. Behind every ‘fall in the market’ there will always be some events just as behind every ‘rally in the market’ there will be other events.  It is the circle of life for markets. At some point the markets will get over-valued, events seen as negative will happen; resulting in markets getting “de-rated” and dropping into the “cheap” zone.

Asset allocation: The on-going equity market drop once again highlights the need for investors to follow a prudent asset allocation strategy. Every asset class goes through cycles. Equities are a volatile asset class with attractive long term returns. Similarly fixed income returns can be attractive over shorter time periods though over the longer term it typically lags equities. This reinforces the need for asset allocation in order to manage risk and optimize returns.

Forest fires always start by one of two ways - naturally caused or human caused. Natural fires are generally started by lightning, with a very small percentage started by spontaneous combustion of dry fuel such as sawdust and leaves. Fires caused by human intervention can be due a range of reasons from carelessness (for eg a carelessly dropped cigarette) to arson.

Fear and insecurity have gripped Dalal Street again. But while the market professionals are still betting big, mutual fund investors, especially the ones who’ve never experienced a crash, are petrified.

As we head into 2019 the question I am asked most often is “What is my view of the elections and how it will impact the market”.

To this, my preferred answer is: ‘I don’t know’.

Debt funds are mutual funds that invest in money market and debt securities to generate returns for the investors. These funds may invest in the securities/ bonds issued by sovereign entities, banks, corporates, Public Sector Undertakings (PSUs), etc. depending upon the specific categories of debt funds' investment objective. Debt funds can be broadly classified into duration funds, money market funds, gilt funds, and credit opportunities funds.