1/n How painful is the current drawdown investors are seeing. A small thread on the topic
My objective was to look at 3 things essentially
How far does the portfolio fall?
How long does it stay in the dumps?
How fast does it fall?
Taken Nifty50 as the portfolio since 1 Jan 99
2/n There are only 3 blocks of period in which Nifty has gone below a drawdown on maximum terms of below 30% since 1 Jan 1999
Dotcom - Period roughly from Feb 2000 to Dec 2003
GFC - Period roughly from Jan 2008 to Oct 2010
Covid - Period roughly from Mid Jan 2020 to present
3/n Dotcom period
How far does the portfolio fall
Max DD was 51%
4/n Dotcom period
How long does it stay in the dumps
The overall drawdown was for over 960 days!
How fast does it fall
It took a long time of 19 months to reach Max DD
Therefore the pain was elongated and slow in this period.
5/n GFC period
How far does the portfolio fall
Max DD was 60%
6/n GFC period
How long does it stay in the dumps
The overall drawdown was for over 670 days approximately
image
How fast does it fall
It took 9 months to reach Max DD of 60%
7/n GFC Period
The pain is extreme in this instance where in the whole drawdown period almost 15% of the times the portfolio is 50% or more down!
8/n COVID Period
How far does the portfolio fall
Max DD is 39% as of now
9/n COVID Period
How long does it stay in the dumps
Too early to say. Its been less than 60 trading sessions only so far
10/n COVID Period
How fast does it fall
The pain in this case is the speed of fall. In 46 trading days the portfolio was down over 30%. Why we are getting pinched this time is because this speed has happened only once before that was for a very few days in Oct & Nov 2008.
11/n
Therefore in the current period the experience of a swift fall is equivalent to only the peak of the GFC crisis.
This is the 'painpoint' for us now.
Source: NSE data. Manually done so there could errors of a few bps here and there.
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Make a consolidated mail for them. And tag that mail in their inbox. For instance my wife has a tab "DV" & color code it. Do this for your sibling & parents if possible
3/ MY NSDL CAS statements get forwarded to my wife and her statement to mine. I have maintained sporadically though CAS statements in a google drive folder to which both of us have access. As investors your close ones should know every single investment you have.
Short notes from the book 'Dead Companies Walking' by Scott Fearon.
I think this is a must read book for all investors to understand when to stay away from a company even if you don't want to short it.
2/n Things go wrong more often than they go right. Failure is actually a natural - even crucial - element of a healthy economy. And the people who are willing to acknowledge that fact can make a hell of a lot of money.
3/n One of the most enduring & important business traditions is failure
1/n A look at the oldest companies & earliest traded stocks
The 1st stock exchange was established in 1602 in Amsterdam. It was made by the Dutch East India Company, chart below
The south sea bubble of 1720 can be seen. The company lasted under 2 centuries & finally went bankrupt
2/n Another company traded in Amsterdam was The Dutch West India Company which also went into bankruptcy in late 1700s. In the chart below we can see both the Tulip mania & the South Sea Bubble.
3/n But these two companies are no match for the oldest companies which exist till today. They could have merged. Some are listed via the new parent too. The types are:
2/n Being a govt doctor working on the field most of the time he rarely put in effort to do any detailed analysis. He tried his hand at a business & failed miserably. Went back to job.
His learning - give money to people who can run businesses efficiently.
3/n You can never create a business in 1-2 years. It takes decades. So why do you think you will make returns in a few months? He bought stocks with the expectation that for 5+ year nothing would happen.