The equity market is like a lion. When you see it take a couple of steps back, it is not to run away, but to spring with great vigor.
Ok this may not sound too great, but you may not have heard it anywhere else too!
You have been hearing Bill Gross saying ‘Equity markets are dead’ and The Street.com saying ‘market is climbing the walls of worry’. You have Robert Kiyosaki saying ‘In 2016 the EQUITY markets will bleed so much..that investors will be dead’….well, well, let us come to India…
You have Shankar Sharma tell Vivek Kaul ‘You can shut the equity markets for a few years…and nobody will miss it’ and you have others saying that in 3 years time the markets will see new heights. You have Naren Sankaran and Prashant Jain saying this is a good time to be buying, because fortunes are made by people who buy when the markets are low.
You see amazingly poor understanding by a few people in the press and an extremely mature Dhirenkumar of valuresearchonline.com saying ‘You still need equity in your portfolio’.
You see the likes of Warren Buffet say ‘Diversification is for people who do not understand what they are doing’ and John Templeton saying ‘You need to diversify across markets and assets’.
Life is really tough if you are a serious investor. What do you do?
Well you do the following:
a. Visit and keep revisiting your asset allocation: if you are happy with the asset allocation, more power to you! Your asset allocation should allow you to sleep well. If your asset allocation does not allow you to sleep well, change your asset allocation.
b. Your asset allocation should help you meet your goals: The risk of ‘not meeting your goals’ is a huge risk, and you should realize that this risk you cannot take. So whatever your goals – marriage, children’s marriage, education,….retirement..the job of your money is to make sure that the goals are met, while letting you sleep well.
c. Read, read, read a lot of the old classics in Investing and equity management: The more you read the more you will realise that there is no ‘one theory’ which works. John Templeton encouraged diversification, and Warren Buffet said ‘only when you do not understand, do you diversify’.
On the one side the paid media says ‘do not try building your own portfolio, come to mutual funds’ and on the other side Motleyfool.com says ‘it is not very difficult to beat the fund manager who has a lot of investing restrictions’.
So what to do?
Well invest in 2-3 well managed funds (do not worry too much about styles and caps – most fund managers are not really true to label) and also create your own portfolio. Keep seeing how is your performance vis a vis the funds / index. If you are doing better than the funds / index, more power to you.
If the funds / index is doing better than you, accept the fact that fund management is a full time job (as you found out, not because i said so), give your money to Naren Sankaran, Prashant Jain, …..etc. and relax.
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