We will all be called by some member of the 4th estate and will have to give a number.
Subra where do you think the Nifty will be in Jan 2019?
Well, er…where is it now?
You gotta be joking, you surely know where it is now.
Me: No. I will actually have to see where it is. Not difficult, but I seriously do not know where it is. Just a Minute..
Oh its at 10,265….hmm…I think it will be somewhere between 9300 to 11300. It is difficult to be more precise these days.
But Subra you really think it will go down so much?
Well, I can predict bonds much better than equities.
Wow, Subra that is great.
Well the 6.9% 2043 Gsec will yield 6.9% for the next 25 years for sure, but I have no clue what will be the market value of he bond in Jan 2019. That is for traders. By now you know that I am an investor not a trader. It is a trader who needs to know the price on a moving basis. I do not need the price on a day to day basis. To me the price of Gillette, PnG, Indigo, Infosys, TCS, Colgate, Hindalco, Tata Steel, Coromandel International, Cholamandalam, Hdfc twins, …..in 2019, 2020….is just some noise. My selling is 2035…or thereabouts. Index? does not matter at all.
Of course you and I maybe in a different plane. Maybe you do not have a 20 year perspective like I do. Maybe you have a need for the money in 2025. Then you HAVE to think differently. Maybe you should remove 10% of the equity portfolio and put it in a bond fund. That still has NOTHING to do with looking at the forecast on a yearly basis.
This brings us to the toughest part of investing – finding your asset/liability mismatch and applying the right long-term instruments to meet your short-term cash flow needs. The longer you can stretch your time horizon for equities or long bond fund, the higher the probability of success. You should be able to withdraw money when the MARKET allows you and not at a time when YOU need the money. Current time is a good time to remove money from say Nbfc and banking shares, but perhaps not such a good time to remove from IT and pharma stocks. Finding this sweet spot and sticking to it is where the real alpha is made – and your ability to maintain a good portfolio that avoids the frictions involved in trying to time the market.
All periods of time test a lot of investors. One never removes money from the market – one removes from certain companies. For example at some time in the future I will sell Icici Pru Life shares and buy Hdfc Life shares – this is not even removing money from the industry! This new year will bring the same old urges to listen to 2018 (20xx?) market forecasts and review what has performed best in the last year. The same people who were wrong last year will now tell you that since they know which performed best in the past 1 year, they know the future! Hey, they were wrong last year right, why will they be right this year? And as these urges creep in just remember that if you allocated your assets to stocks and bonds you own inherently long-term instruments that are unpredictable in the short-term.
But salespeople will try to get you to buy their short-term forecast in exchange for the guarantee of higher returns! what it means is higher taxes and fees.
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