1.Remain convinced - in the very uncertain global economy and India's unique growth positioning (medium to long term ) - and the fact that our markets are mostly driven by FII money - Indian Markets will continue to have its mood swings - flashes of big optimism, consolidation, and pessimism - on a regular basis.
2.We have watched varying reactions from friends we respect - in their bid to handle the same. Some went to 40-50% CASH as early as Oct 2015. And they were hailed as genius in Jan/Feb 2016 after the 3 month mayhem. From Mar 2016 onwards, when the Markets started rebounding, many of these friends were left sitting out, and most haven't been able to get in, most of them have missed some big gains in the interim. Again the jury is split!
3.We have also seen some other friends we respect - remain fully invested, all through. Some of them did a few odd switches, but mostly rued the fact that being fully invested, they couldn't take advantage of some bargains they would have taken real advantage of - if they had CASH !!
Mr D had instilled this early in us - (instructive to go back and check the 2011 Capital Allocation thread) - We must have at least 20% CASH in ALL STAGES of the Market. Otherwise we will NOT be able to take advantage of the bargains that Mr Market offers - every year - sometimes, 2-3 times a year !!
Those who have followed the Capital Allocation discussion then with some thoroughness - might remember the discussion around the Opportunistic bets - that allowed us to be in some sort of quasi-cash all the time - since being opportunistic bets, we wouldn't mind trading some/all of that in for a CORE bargain!!
Think it is the same robust underlying philosophy of holding/handing quasi-cash that sort of morphed in 2-3 additional avatars - Steady Compounders, Cash Plus, Cash.
What does that do? It allows us 2 things:
1. Greater flexibility to remain (almost) fully invested
2. Take full advantage of REAL BARGAINS, when we KNOW them (prior or new homework)
Sure, we sacrifice some of that core growth possibility, for the sake of more STABILITY. Why is that?
- because inherently quasi-cash candidates - perception (valuations) are mostly in-line with performance - steady or subdued, as the case may be