Market appears to be very precariously poised…it may correct for some time…maybe a month or two…before resuming prebudget rally from around 8200- 8100 lvels onwards…
…a good strategy would be to buy some quantity now and average down when the market falls…
The correction can start anytime…maybe from next week onwards …or maybe when NIFTY hits the rsistance @9100
What I am doing -
Getting out of whatever is left of my equity mutual funds
Taking some money off stocks where either the implied growth rates from CMP are starting to look stretched
Keep allocating to my fixed income portfolio (sticking to the shorter end of the yield curve since my duration positions have been in since 2014)
Keenly looking at the F&O prices, I may start building hedging positions unless I see an uptick in commodity prices soon
Individual stories where I see value - I will keep adding without giving broader market levels undue importance
I know this is kind of an open ended question, but may I ask why? The no of stocks in a MF portfolio should/might average the chance of a hard fall, no?
But why does one even invest in equity mutual funds? ( if one has some knowledge)
Anyways coming to the topic. forget about the overall market. thers hardly any individual story which is undervalued/reasonably valued.
I have been investing in debt mutual funds.
Over a period of time I’ve come to the conclusion that I want to manage all the equity exposure myself. It’s tough to say this without coming across as an overconfident bloke, I think I can continue to beat most fund managers most of the time for the simple reason that my set of constraints are more favorable than what the fund manager needs to work with. There are periods (including the last 3 months) where I do under perform an MF/Index but I am willing to live with that.
Options is how I want to get downside protection, keeping some allocation to MF’s hasn’t really worked out from this point of view
@zygo23554 so, you did not sell those equity MFs with the view that market is overvalued but because you are confident that you will beat the fund managers? is that correct? if that is the case, I would not want to infer that the market is overvalue because you are selling even your equity MFs
Its more like - I think I’ve made some threshold return from equity MF, I got to get some liquidity ready now so I will sell the equity category I think will give me least returns from here - hence equity MF & stocks where implied growth rate is starting to look stretched. It’s also a goal of mine to beef up fixed income allocation through the year.
As for overall market valuations - Not yet alarmingly overvalued but I guess we are in a zone from where incremental returns above 12% may be hard to come by immediately
I feel that over-reaction in a given situation is bad for wealth creation. Market is at moderately high PE level and some of the good stocks are hitting all time highs. Is it a time for emptying the stock portfolio and redeeming the MFs with good return?
I feel the answer is NO. The idea of profit booking is a personal target based action depending upon one’s investing psychological pattern. That is a different point.
If you’re salaried in the 30% tax bracket, ELSS MFs makes a lot of sense because you’d end up saving 45k potentially (if you’re not under EPF) on taxes on a amount of 1.5 lacs.
So even if you have some/good/great knowledge about equities and can say generate market beating returns of 20% for 3 years
1.05 lacs post tax will become 1.81 lacs
whereas entire 1.5 lacs invested in ELSS generating even 10% will become 2 lacs.
(Also most ELSS returns have been >15% for past 3 years)
And what are the chances we’ll beat the fund managers by a significant margin (ex:10%) year after year for 5-7 years?
Mirae Asset tax saver has given 57% return over 2.5 years. I understand that it is also because of timing of investment and this kind of return may not be possible in future but still add to this tax saving of 30% and you have good overall return !!
To be honest, nobody can answer when the markets would fall. And those who try to time the top, most likely end up losing the blind run in last few months/years which create the steepest of skyscrapers on the chart.
Coming to your question, as some of the senior boarders said, you can always get good stock specific opportunities at all times (good businesses at a reasonable price), but in a bull run as the market stretches, these opportunities become fewer and harder to find. Contrary, in bear market bottoms you’ll get plentiful good businesses at throw away prices. So yes the risk of losing money seems to be higher compared to the opportunity cost at the moment in the current market cycle. Hence, you should not think about committing your entire funds at the moment. Rather, take small positions in market correction/s and spend this time in learning as much as you can about investing. If you get a chance to see a bear market soon, then consider yourself lucky and invest wisely. It would probably be the best opportunity for you to take a plunge and enjoy the fruits of patience. Good luck!
