If one has to describe the year 2018 for financial markets in one word, it would be 'volatile'. As we have known, markets tend to be volatile in short periods of time and 2018 was not surprise. The year saw both the Indian and the global markets having bouts of volatility. As we come close to this year, perhaps we can draw a few lessons and refresh ourselves of what will soon be history – year 2018.

The year's market fluctuations had multiple reasons. Market volatility also saw it's impact on the investor's returns. The reasons include, weak global markets, US and China trade war, slowing earnings growth, increase and decrease in oil prices , state elections, ongoing tiffs between RBI and the Central Government and so on. The year saw the Sensex at an all time high of 38,989 (29^th August) and at a year low of 32,483 (23^rd March), moving in a range of over 20% during the year. As the year comes to a close, the markets are around 36,100 levels compared to the year's start of at 33813. With all the volatility, the year is still closing on a positive note with an increase of over 6.5%. The graph below will shows how the BSE Sensex has moved this year.

There one thing which has been keenly observed this year and its' about investor behaviour. The intermittent market swings did not dissuade the investors and instead they seemed to have become more mature. There have been incidents when the market didn't over react to a certain news and also bounced back quickly after some knee jerk reactions. One such instance was observed recently on 12^th December when news of BJP loosing all three states and the RBI governor resigning came. When everyone would have thought the markets will tank, the opposite happened and the markets closed much higher for the two action filled days. This showed that nothing is truly predictable in the markets in short term.

The volatility and jolts did affect portfolios and returns.

When one takes a narrow look at the returns for 2018 alone, a lot of portfolios may have underperformed compared to expectations. This is not new in equity markets and hence it is important to understand that in the long term, the effect of volatility is smoothened out as we can see from the broader indices. As investors, we are sure that for our readers, the focus continues to be on the long term investment. Markets will always be volatile, sometimes more and sometimes less, especially in the short term.

Thankfully, the year did see more maturity from investors. Instead of investors shying away from investing in the market, investors continued to prefer the SIP route to investing which actually works best in markets with high volatility. The mutual fund SIP investments in November 2018 rose by 35% to Rs 7,985 crore, from Rs 5,893 crore in November 2017.

Similarly SIP investments from April to November 2018 rose by 48% to Rs 60,457 crore, from Rs 40,780 crore during April to November 2017.

Apart from retail investors, both the foreign and domestic institutional investors have also remained positive about the Indian economy, irrespective of the fluctuations in the stock market.

During the times when the market price of your investments is falling, one should remember the rule of the ace investor Warren Buffett. The rule is, when the market prices of your investments are falling, you should increase your investment more as you can now by the same investment at cheaper rates. The same rule can also be observed in the average price rule. The average rule basically helps you take advantage of the volatility.

Obviously this is considering that you are investing in the right asset class for the right time horizon, keeping your risk profile or portfolio asset allocation in mind.

To end, let us again remind ourselves that the equity markets are bound to be volatile in short periods of time like say one year. Evaluating anything and making judgement over short term is really not in the best interests of anyone. If the markets where volatile, that is how they usually are in short term and are again likely to be volatile for year 2019 as well. As investors, we should just learn from the markets and keep our conviction in long term growth story of India.

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Procrastination is something almost every one of us is guilty of. We tend to put off things till later, make excuses for not doing something we should have prioritised, waste time on social media on doing things which are unimportant. While a little procrastination does not hurt, procrastination with important things can be very risky. We have all suffered because of procrastination, missed deadlines, had to stay up all night finishing up something which should have been done a long time ago, working on the weekends etc.

While the reasons why we procrastinate are deep-rooted in our psychology, we generally tend to procrastinate more with stuff which seems daunting and requires effort and decision making.

One such area is investing.

Most people understand the importance of investment and know that without investment they are taking some huge risks regarding their future, however, they still tend to delay their investment decisions. People think they have enough time and it won't make a huge impact if they start investing later. What one needs to understand is that, they are forgetting the “magic of compounding” and are foregoing their returns by not starting earlier.

The “magic of compounding” is the simple function of money, which explains that not only do you work for money, but your money also works for you.

While one may argue that he or she will invest a higher amount during the later years when they can save more and thus invest more, the growth in corpus will still be different because of compounding. Let us look at the case of Amit and Rohan.

Both Amit and Rohan are of 25 years of age and want to retire at 60. While Amit starts preparing for his retirement by starting at 25 with an amount of Rs 5000 per month, Rohan starts at 35 with Rs 10,000 per month. Both of them invest in funds which deliver a 12% CAGR over long term.

At 60, Amit's portfolio is worth Rs 3.25 crore and Rohan's portfolio is worth Rs 1.90 crore. Even though in a total of 35 years of his investment, Amit invested a total of Rs 21 lakhs and Rohan in total of 25 years invested Rs 30 lakhs, Amit's return is higher because he started earlier and his investment was compounded for 10 more years than Rohan's.

The power of compounding is clear with the above example and it shows that even if we convince ourselves that we will be able to cover up for the time lost by investing more, growth in your corpus will still be lower if you start late.

It is important to remember that difference in corpus amounts will be even higher if one makes high investments since the beginning or invests in portfolio with higher returns.

While we have assumed the return in Amit's and Rohan's case was at 12%, the difference in amounts would have been even higher at a higher return, say 15%. If Amit and Rohan invest at 15%, while Amit's corpus would have grown to Rs 7.43 crore, Rohan's investment would have grown to only Rs 3.28 crore.

One can come up with multiple reasons to not start investing immediately, like you don't save enough or you don't know how to begin with it or you need the money for emergencies, etc etc. One just needs to go to the simple motto we've been taught since childhood, where there is a will there is a way.

Just like at the beginning with everything else, the first step is the hardest and everything works up naturally after that. Even with investing, setting your goal and deciding where to investment might seem daunting at first, but once you take the step and set up a SIP, it all aligns up automatically and there is not much you have to do after that.

Also, if you are thinking, I am already too late, just remember, you are never too late and it's better late than never. You can always figure out a way, especially with the help of a good advisor, who can guide you through with your investments.

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Life is like a convolution of waters, the creeks merge into a river, the rivers split into tributaries, but the ultimate destination for all is one, eventually they all merge into the sea. Similarly, all the roads in life ultimately converge towards Retirement.

Retirement is the grand finale of every competition. And almost everyone has some retirement fantasies at the back of their minds. We all have given a thought at some point of time about how our retirement life is going to be. Whether you ask a 50 year old or a 30 year old, both of them will have their retirement fantasies in mind. The 50 year old may have a more realistic response to the question, since his retirement is almost a decade away, he can predict the total resources he will have considering the investments he has made for his Retirement, he can see his goals that are coming in between, and he knows how much he can stretch to contribute to the corpus. The 30 year old's retirement dream may be much more extravagant. He may want to live in a beach villa in Goa, he may want to ride a BMW, he may want to go for foreign trips, he wants spend the last years of his life in utmost luxury.

And you know, the 30 year old can do all of this after his retirement. Because he has 30 most productive years of his life in hand. He has all the time in the world, to work his socks off, save and invest more and more, and live all his whims.

So, the sooner you have the answer to the question, greater are the chances that you will live an affluent post retirement life, you will be able to provide to yourself a better quality of life, just by thinking and acting in time.

If you can visualize and plan for your post retirement life at an early age, you are better of because:

• You have the time & power to take decisions and mould your life the way you want to.
• You have the time to prioritize your goals. You can carve out from your other goals to contribute the maximum to your Retirement goal.
• You have the capacity to work more, earn more, and save and invest more. They say, it's easy to shoot the target, when you have the target. When you can see the mirage of your dream retirement, you will run as fast as you can, to bridge the longest laps.
• Your investments will get the maximum time to illustrate their true potential. If invested in the right asset class, the compounding effect can multiply your principal manifold.

Write the Sketch
Take out your diary, and write all what you want to do in your golden years. Write down every figment of your imagination, no matter how flamboyant or unreal it seems. Whether you want to go for a world tour with your spouse, or you want to go back to where you came from, and settle down with your school friends in your hometown. Whether you want to reside around the serene beaches of the Andamans or you want to pursue your passion of nurturing plants and send fresh organic fruits for your grandkids from the backyard of your house. Whatever whims you have, ink them, you have the ability & most importantly time to personify a lot of those whims that may seem unreal today.

Fill the Colours
Once you have your retirement sketch ready, it's time to get into action. Quantify your wishes in monetary terms, the money you would need to go for the world tour, or to buy a beach villa in the Andamans, the money you would need to survive, to meet your everyday expenses, and to maintain your lifestyle. Let's say, today the cost of doing a 2 year long world tour is Rs 1 Crore for a couple, assuming you will retire after 30 years and assuming an average rate of inflation of 5%, the cost of this world tour will be Rs 4.32 Crore, when you retire. To live your dream, you need to start an SIP of just Rs 14,000 a month in an Equity Mutual Fund, assuming a moderate rate of return of 12%, you will have Rs 4.32 Crore for the World Tour when you retire. The point is, you can actualize your fantasy, something which looks unrealistic today, by investing just Rs 14,000 a month.

You can accomplish all your dreams, it's just that you need to think ahead and plan to live your big dreams. Share the agenda of your dreams with your financial advisor and he will guide you through your journey towards those dreams, he will prepare a step by step plan for you to work towards, save and invest for each of your dreams.

To conclude, dream big, stay focused and believe in yourself, you have the power to win the whole world.

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