Why are markets taking a nasty “U” turn? – from the archives

The year 2016 has begun on a threatening note for the global stock markets with China leading the way. The current events remind one of the phrase “bull in the China shop” – just that this time it’s a bear, in the stock market lingo.

Someone sent a note suggesting the leveraged positions that retail investors had in the Chinese stock market.

Here is one of my old articles, written in 2007 for http://www.moneycontrol.com.

Why are markets taking a nasty “U” turn?

In the book “Riding The Roller Coaster – Lessons from financial market cycles we repeatedly forget”As I have quoted Bishop Desmond Tutu: “What we learn from history is that we don’t learn from history”

Enjoy reading!



Aftermath of boom and bust

In the aftermath of the boom and bust, many lose out completely and the world moves on

#RidingTheRollerCoaster – 44

Why are the markets falling?

The market crash of the last few days has been very steep and the reactions from people also have been quite caustic. The Sensex song has resurfaced after a long gap. Some people have highlighted that the crash is “made in China” and hence it can’t last long.

What is the purpose of this analysis? What are we trying to achieve by identifying the reasons behind the crash? I guess the idea is to be ready when the next time these situations arise.

What is the reality? Here is an excerpt from my book “Riding The Roller Coaster – Lessons from financial market cycles we repeatedly forget“:

As long as the open markets survive, wherein people can come and trade on the basis of their opinions, we will see the prices fluctuating, with amazing regularity. We have a tendency to expect explanations for everything – even if the explanation is incorrect. Experts (while there are genuine experts, in some other cases, the expertise may be questionable) are in abundance to fulfil this need of the masses. However, if you look at the explanations given, they often cannot pass scientific tests.

When the result is the same and the reasons keep changing, you know that the reasons do not matter. They have lost relevance.

That is exactly the case with explanations of market volatility. The reasons attributed to short-term market fluctuations keep varying, but the volatility is here to stay. The right thing to do is to accept volatility and stop finding the reasons behind it.

Remember the old saying, “You can’t direct the winds, but you can adjust the sails.” Translated in the context of this book, this should read as, “You can’t prevent market crashes, but you can safeguard your portfolio.”

The message is loud and clear. Stop thinking of the reasons behind price fluctuations. You portfolio needs to be such that the impact of market crashes do not steal your good night’s sleep.

So what should you do now? Nothing. Do not let the market fluctuations upset your financial plan, provided you have one. If you don’t, get one.

  • Amit Trivedi, author of “Riding the Roller Coaster – Lessons from financial market cycles we repeatedly forget”

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Coverage about the book on www.networkfp.com

Network FP’s website writes about the book.

Network FP is a knowledge platform for financial planners in India. We help advisors build a client-centric, process-driven and knowledge-based practice leading to professional & personal success !

The article carries the foreword written by Dr. Uma Shashikant.

NetworkFP website covers the book

First event to speak about the book was a super hit

Thanks Amit Dani, Parag Paranjpe, Ranjit Dani, Mandar and others. It was great talking to your clients. More than 250 guests