Despite all the chaos that occurred across the world in the last twelve months, are you still staying invested in the stock market? We had posed this question to you in our Investor Survey conducted in December 2008. The results left us very enthused and proud to have you as our readers and subscribers. In this article we give an insight on some of the most voted factors.

Yes, I remain invested: Being the most outstanding result of this poll, the response to this question clearly indicated the faith of our readers and subscribers in the stock markets. As much as 71.5% of the voters responded saying that they remain invested in the markets. The year 2008 and the early part of 2009 have been every investor’s nightmare. Besides the volatility in the markets, the economic slump, unfavourable business conditions and lack of business confidence made it difficult for investors to choose their investment opportunity despite the availability of some attractive bargains. Fortunately, investors did not compound it by exiting at the wrong levels.

Equities as an asset class should be viewed with long-term investment horizon and investibles that would be required in the medium term should be diverted to other asset classes - essentially of the nature of debt or liquid assets. The doyen of value investing Mr. Warren Buffett, who is also a firm believer in long term investing, has said "Only buy something that you'd be perfectly happy to hold if the market shut down for 10 years". Need we say more?

We were indeed with our readers’ display of the rare sense of rationality of not exiting the stock markets in a hurried manner. Whatever you may call it - boom periods or bull runs and busts or bear markets, staying invested over a long term period has offered good returns to investors. For example, at the peak of the bull run in the year 2000, the BSE Sensex had touched levels of around 5,900. We have come a long way since then. Markets touched levels of 21,000 in early part of 2008. This translated to compounded annual returns (CAGR) of 17% over a period of eight years.

Yes, but I have sold some of the stocks that I owned: 16.2% of the voters said that while they remain invested in equities, they have sold part of their portfolio. For obvious reasons, the emotion that would determine this decision would be uncertainty - uncertainty about global and domestic economies, business turmoils and their consequences on the stock prices. Investors who were uncertain about the fate of some of their equity investments may have diverted their capital to other asset classes. Another reason that may have prompted investors to liquidate some portion of their portfolio may be leveraged purchases. It is important for investors to remember that investment in equities should not be made with borrowed money as the same can only hamper your investment horizon and reduce your tolerance of market volatilities. Also, it is necessary to keep sufficient levels of cash when markets are at their peak to take advantage of attractive buying opportunities as and when the correction takes place.

Looking to invest: 9.1% of the respondents mentioned that they have sold off their portfolio completely and as such are awaiting the right moment to enter the markets. It should be noted that the Sensex is currently trading at a price to earnings multiple of 12.5 times as compared to 25.5 times in January 2008. This would be the right time for investors to invest in equities as they have not been available at such valuations for quite some time. The chart below shows a better picture:

Nah, have completely sold off: Approximately 2.5% of the voters have responded saying that they have sold of all the stocks during the last one year. And the balance 0.7% respondents have said that they have completely lost faith in the markets and will never invest in markets ever again. This should not be the case with investors looking to park their wealth in equities. Just as slowdowns and recessions are part of economies, bear markets and crashes are part and parcels of stock markets. If an investor doesn’t have an appetite to swallow the near term volatility in markets, then it would be not unfair to say that equity markets are not suited for their temperament.