Very interesting topic @valuestudent !
its funny that i also have the almost same portfolio as your’s, I guess we both are following the same advisor’s and blogs , the only difference is, that I am still allocated 70% of my equity allocation , i also have been going through same struggle that you mentioned(Exit or stay invested), and the conclusion is almost same that neither can I predict nor can I time, but I can prepare.
Options for Preparation:
Option 1) Reduce the equity allocation
Option 2) Move from Richly valued stocks to a bit low quality and relatively cheap stocks
- Reduced 30% of my equity pf.
- Moved another 40% from richly valued(MicroFinance stocks bought during Demonetization) into stocks which are relatively cheap stocks with improving fundamentals. [Like Tata Motors DVR and a Basket of mid cap IT stocks], hence out of 70%, currently 30% of equity pf is same as yours.
Rationale for option2:
I heard from exp investor that in Bull Markets
1st) Quality runs up and gets priced for perfection and then
2nd) Low quality with improving balance sheet runs.
3rd) Junk also starts running and the third leg is the end phase of bull markets.
and once all segments of investments are priced up markets again value things relatively with other asset classes(FD, Real Estate, Gold) and if any asset class offer better risk-adjusted returns then shift of allocation start happening(such shifts are usually soft started and then feedback loops start working and gets to the point of intense buying/selling)
and I experienced the 2nd case is happening, as my basket of Mid cap IT ran up 10-15% in last month or so.
We really can’t say at which stage of Bull market we are currently in, since India’s growth story seems to be just started and results of reforms are still awaited and markets already ran up.
I relate such a state of the market with the term Reflexivity used by G.Soros, which basically means markets price in expectation a bit early then reality kicks in, since markets are discounting machines for futures.
hence i don’t have any bear case in my mind, but I want reality/results to show up and till then i would be taking caution with the mentioned steps.
Disc/Profile: I am young novice investor, in markets since last 2 years only, and my equity allocation is 30% of overall networth.