A real account (anonymised) of a client who faced a 28% drawdown in his first year of PMS investing. What he felt, what we discussed, why he stayed, and what happened next.
This is a true story about one of our investors. His name has been anonymised and some details changed to protect privacy, but the emotions, decisions, and outcomes are exactly as they happened. It's a story about conviction, panic, and what happens when you have the right support system during a market crash.
The Investor: A 55-Year-Old Businessman
Let's call him Rajesh. He's 55, runs a successful import-export business generating ₹3-4 Crore annually, net worth of ₹8 Crores. He'd thought about investing more aggressively but hadn't acted until now. He came to us because he'd read about PMS and AIF but felt lost. He wanted better returns but didn't trust himself to pick stocks. Running a business consumed his attention. He wanted a professional who would handle investment decisions while keeping him informed.
The Investment: ₹1.5 Crore in a Mid-Cap Focused Strategy
After our 7-step process, we recommended a mid-cap focused PMS. Rajesh deployed ₹1.5 Crore (20% of net worth) as a long-term investment with 3-5 year horizon. The fund manager's track record was solid: 15-16% annualized returns over 5 years, with maximum drawdowns of 25-30% during corrections.
Important Note
Rajesh understood intellectually that 25-30% drawdowns were possible. He said "I can handle that." But understanding intellectually and experiencing emotionally are two very different things.
Month 1-4: Everything Is Fine
The portfolio started well. By month 4, ₹1.5 Crore was valued at ₹1.58 Crore—a 5.3% gain. He was happy and considered increasing the investment.
Month 5-8: The Correction
Then the market corrected rapidly. By month 8, his portfolio was valued at ₹1.09 Crore—a ₹41 Lakh loss. That's a 28% drawdown. Exactly what we'd discussed. But psychologically it felt catastrophic. Every portfolio check seemed worse. Business had also slowed, shaking his confidence in his income.
The Panic Call
Rajesh called us on Saturday afternoon. His voice was shaky. "I need to get out. This is going down every day. I can't sleep. Maybe I should move the money to fixed deposits. At least I'll get 7%." We didn't dismiss his concerns. Instead, we scheduled a Monday call and told him to take the weekend to cool down.
The Monday Conversation
Rajesh was calmer but still anxious. We discussed what had fundamentally changed. Had anything about the fund manager changed? No. Only price changed. Had he need liquidity? No, ₹6+ Crore in other assets. Could he wait 2-3 years? Yes, 15+ years until retirement. We applied a framework: (1) Did something fundamental change? No. (2) Do you need this money urgently? No. (3) Can you afford to wait? Yes. (4) Is this the worst case statistically? Yes, 28% was near maximum. (5) What's the alternative? 7% in FDs doesn't match wealth goals. The answer was clear: Hold.
The Power of a Framework
Investors make terrible decisions when emotional. A clear decision framework—applied in advance, before panic—helps you stick to your thesis. Rajesh didn't invent this during the correction. We'd discussed it before he invested. That made all the difference.
The Recovery
Rajesh decided to hold. He rebalanced by deploying dry powder into the portfolio at lower prices. Within 18 months, the portfolio had recovered and was up 8%. By year 3, up 28%. By year 4, 35% cumulative returns. His ₹1.5 Crore deployment grew to ₹2+ Crores. More importantly, he learned that corrections are normal—not disasters if you have the right framework and support system.
| Time Period | Portfolio Value | Change from Initial | Return |
|---|---|---|---|
| Initial | ₹1.5 Cr | — | 0% |
| Month 4 | ₹1.58 Cr | +₹8 L | +5.3% |
| Month 8 (panic) | ₹1.09 Cr | -₹41 L | -27.3% |
| Month 18 (recovery) | ₹1.62 Cr | +₹12 L | +8% |
| Year 3 | ₹1.92 Cr | +₹42 L | +28% |
| Year 4 | ₹2.03 Cr | +₹53 L | +35% |
Key Lessons
Lesson 1: Knowing vs Experiencing
Rajesh intellectually understood 25-30% drawdowns were possible. Experiencing it was different. He felt it in his chest. You need strategies to manage both the rational and emotional aspects.
Lesson 2: The Right Advisor Makes a Difference
Without proper guidance, Rajesh would have redeemed and locked in losses. Instead, a clear conversation framework helped him make a rational decision during an emotional moment.
How to Prepare for Drawdowns
- Be clear on your time horizon before investing. If you can't wait 3+ years, PMS isn't for you.
- Understand fund manager's historical drawdowns. Know the worst that happened.
- Build a decision framework in advance. What conditions cause you to redeem? Write it down.
- Keep dry powder. Having cash reserves gives you the option to deploy during corrections.
- Set a review schedule. Don't check portfolio daily. Review quarterly or semi-annually.
- Have your advisor's number. When panic hits, talk to someone who provides perspective.
Final Thoughts
Rajesh's journey is not unique. Most long-term investors experience this. The difference is whether you have a support system and framework to help. Markets will correct. Your portfolio will be negative at some point. The question is: Will you panic and sell at the bottom, or stay the course? Rajesh chose the latter, and it paid off. More importantly, he learned to trust the process—and trust himself.
CA Niraj Thacker
Co-Founder, PMSAIF Partners
SEBI-registered PMS & AIF distributor with over 15 years of experience helping HNI and NRI investors make informed investment decisions. Committed to education-first advisory.