Suvi Investing Journey

I am happy to know you could able to identify a money and risk management for yourself and you are working on it. There are people on both sides, even averaging down works beautifully; subject to they should know capital requirement, stock numbers, risk of ruin etc. It’s a whole picture which can be fixed basis your own capital, your psychology, stock selection and so on. Important is to understand what works for me! That would require open our eyes rather than carried away by hyperbole. The challenge to my opinion (I can’t say about others, but I have faced all these):

  1. CAGR is not the right measurement of metrics, it doesn’t tell you anything. You won’t know what works for you or not I.e. whether it was profit percentage, accuracy or even loss containment.
  2. CAGR calculation is not easy in non linear place. When components are variable and moving you just can not calculate end number and publish CAGR.
  3. 50-60% drawdown depends on your capital availability, number of stocks and psychology. If I have 1 lac rupees and invested in 8 stocks for 80000. With 20000 rupees I am planning to average downward , you can imagine how dilapidated condition you are in. Second can you digest that kind of drawdown? At least I can not now, I won’t let go my entire decades of profit in a whisker.
  4. Large drawdowns are handled by people using ‘OTHERS MONEY’. There are multiple reason behind it. A good number of these guys can’t come and go in so easily due to liquidity. The number of choices available become narrowed down, if exit then what to do? PMS is far better situation in this regard.
  5. Averaging down increases your risk significantly. Again it will go back to your deep pocket, psychological texture, concentrated portfolio and so on.

Sir you would agree market is non linear place. If we try to assume we can conquer it by assuming everything is predictable and in long run it will take care it’s a fallacy. This attitude has beaten down many sooner or later. Rather than predicting Sensex at 45000 or 15000 at any time I would probably do is:

  1. Have an entry and exit plan always. This is irrespective of market condition, many factors influence an exit plan. E.g. my own metrics, I will try protect my historical average. Can you ask Michael Phelps to slow down in 5 races to 5 minutes so that he can win next races in fraction of minutes. Athlete works on his own performance, he doesn’t take loses or slow down easily rather cut them and analyse to come back immediately.
  2. Average holding period tells us how effectively we have been managing our psychology. Agree, this period every one is a Phelps, but over a period of time your will realise it’s far tougher to hold a stock than what we think.

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