A recent post to our subscribers on the current market situation. Hope you find it useful
We have experienced 13 drops of more than 10% in the last 14 years of our advisory. A few have been more than 20% and the one in 2020 was 30%+
If you have been in the equity market for a long time, this is not a surprise. Even a cursory study of market history, shows the same. Yet, a lot of people get shocked by such drops.
The recent drop is being explained with a new set of reasons whereas just a few months back, India was being touted as a miracle economy. If you really need a reason, how about this? – The markets fell as it often has in the past and will do so from time to time in the future
A study of the past
I recently did a talk about past cycles of manias and booms & busts. You can watch the recording here. Some of the key lessons are
Manias and crashes are driven by human nature. They will always be there as long as people are trading in the markets
There is a plausible, kernel of truth which gets stretched to excess
No one can predict when/where a bubble will start and when it will end
Media always acts as a cheer leader of Bubbles (Story/Attention Bias)
As part of this study, we also reviewed the past 25 years of the Indian market. We have incorporated the learnings in a new process, where we review the market on a monthly basis to gauge its trend, breadth and sectors which are doing well and ones that are slowing down
As a result of this review and rising valuations, we started exiting some positions and are now at 25% cash levels
Did I foresee that the market would drop? No amount of market analysis can help you forecast the future. What we did realize was that some companies in our portfolio were stretched and so we started pulling back. We also exited positions where the performance was poor and the stock was weakening
In a nutshell, we raised our cash level as the risk reward ratio in our portfolio dropped
So what about the cash?
The next set of questions, we invariably get after every drop, is when we plan to invest the cash. For starters, we are not swing traders who are trying to catch the swing low to make a 20% gain on the next bounce
Our focus is to buy stocks with a 2-3 yr window and a 10% drop is not enough. Several stocks have dropped from a PE of 100 to 70. That is not cheap
We are constantly searching for new ideas and that process continues independent of the market condition. A bear market turns up more ideas for consideration, but we are not in a hurry. We have slept well and made reasonable returns inspite of holding high cash from time to time. We will continue in the same manner
There are some stocks which have a high risk reward equation for investors, but the equation does not work for the investment manager
Let me explain – There are some stocks a fund manager can buy and even if he loses money, his investors will not be upset. Think of HDFC bank or Reliance industries
And then there are stocks which if you lose money, you will be questioned (to put it mildly). There have been such positions in our portfolio in the past. The prime example was Shemaroo. I still have some of those emails with me as a reminder
We try to ignore the noise and act as rationally as possible. That said, I am human and experience the same emotions. We are far tolerant of such positions in our own portfolio compared to what we recommend for all of you. Neuland labs was not entirely in that bucket, but had elements to it when we re-initiated the position
To begin with, we lost money on it in our first try. We were cautious in restarting the position and did not want to impact the portfolio if it failed again.
High returns are not free
There are some positions which have worked very well in our personal portfolio, but we will not add to the model portfolio. These are small cap, turnaround companies which have a higher risk reward ratio. Also if things go wrong, exit is not easy.
There is no free lunch in the stock market. We are not going to find a 20% compounder with 25% ROC valued at 10 times earnings. There was a time when such stocks were available and I was lucky to invest in some, but those days are long gone
We some time buy these higher risk/reward, ugly looking stocks for our personal account, but the downside for the model portfolio is too high.
We are thinking of how we can develop a different product for such stocks for investors who are tolerant of much higher risk. We will keep you posted as we get ready for the launch
Disclaimer
This report is published by RC Capital Management – SEBI Registered Investment Advisor (INA000004088).
This report is for educational purposes only and should not be construed as an Investment Advice.
RC Capital Management may have recommended the above stocks to our clients in the past. However, this is not a recommendation to buy / hold / sell the stock at the time of publishing this report.
The securities quoted are for illustration purpose only and are not recommendatory
RC Capital Management may hold position in any of the companies mentioned in the report at the time of publishing the same. Its partners may hold a position in this company in their individual capacity at the time of publishing.
Neither RC Capital Management nor its partners have received any compensation from any company mentioned in this report for the preparation of this report.
There is no conflict of interest for RC Capital Management / it’s partners due to publishing this report
First a disclaimer: We don’t provide financial planning services, so this is not a sales pitch
I recently met with my extended family and went through a financial planning exercise for some of them. It was a learning experience for all involved
The no.1 element of such exercise is behavioral, or psychology of the individuals involved. An advisor who misses this point and focuses on numbers alone will never be effective. This is like a doctor who prescribes a medicine but does not understand the motivation and fears of the patient. Patient compliance is low in such cases
I focused on the psychology and life situation of each individual and tailored my advice accordingly. I also tried to simplify as much as possible so that it would be easy for them to follow my advice. I used a 3 bucket analogy for savings and investing
Bucket 1: Liquid assets for emergency expenses
Bucket 2: Savings for children’s education (medium term)
Bucket 3: Savings for a long term goal – Retirement
Let me share three case studies and hopefully you can see some value in them even if your personal circumstance may not fit it
Young single mom
A single mom and sole earning member of the family. She is making a reasonable income and is saving a small portion of her income. Most of the savings are in cash or fixed deposits due to lack of knowledge.
I explained the three bucket approach to investing. As she has enough asset in cash/FD, we decided to move some of this capital to broadly diversified mutual funds. The idea was to get started with a small amount initially and then add via SIP over time (to reduce the timing risk)
I took time to re-assure them that her financial situation was fine, and she was doing a good job of saving. She had to focus on creating long term assets to fund her children’s education and her retirement.
Married couple with young children
Typical married middle class couple with home loan and other expenses. They are making reasonable income and saving some portion of it. Most savings are in cash or FD earning low rates of return
I followed the same three bucket approach to investing. The recommendation was the same as the prior case, but as they are making a good salary, we decided to move faster into mutual funds compared to the single mom
Also, they could fund some of their children’s education through regular earnings and could focus on saving for their own retirement. Finally, any bonus or windfall was to be used to pay down debt after ensuring that there was enough in the emergency fund
Married couple with children and volatile income
Very similar to the second case, but the income is very volatile due to business instead of salary income. My template for financial planning was the same as the previous cases but I have asked them to build a 12 month cash reserve.
The surplus capital will move into diversified mutual funds for funding their kid’s education and their own retirement
Some observations from the exercise
The online / Twitter world is completely disconnected from the reality of 90%+ people in the outside world. On Fintwit, a lot of people are jumping around talking of their multi-bagger picks and beating the market
The rest of the world is busy with making a living and saving the best they can. There is a high level of ignorance in terms of financial planning and investment options such as mutual funds. A lot of people are good in terms of savings (though this is reducing), but have no idea on how to invest
As a result, they are invested in low yielding assets. These people also face the risk of mis selling by unscrupulous people. Frustrated with low returns, these people are sold high risk products which does not suit their financial situation or goals.
If like me, you are proficient in financial planning, I think its our moral duty to advise such people – provided they are open to listening. A lot of people will ignore your advice, but a few will listen and that is enough.
If you can help someone secure their financial future, then you have done a big service to them.
Selecting a few mutual funds
I provided a few names to my relatives which I cannot share for obvious regulatory reasons. My criteria for selecting these funds was very simple.
Ignore all high risk funds such as Quant, thematic, sector etc. Their returns may be good, but they are not suitable for the people I was advising
Select a broadly diversified flexicap fund
Short list funds with above average 5 – 10 years of returns
Recommend two or three funds. There is no need to go beyond that
The key is to get started and not split hairs on which fund has given the highest return. As I mentioned earlier, the online world is fixated on alpha, whereas in the real world just getting started and making more than an FD will make all the difference
It was the later part of March 2020 and I was really worried about the tail risks to our portfolio. I started getting worried about Covid in late feb/early march and wrote the following posts on it
And the key post in the series: Economic sudden stop in which I wrote the following
What is an economic sudden stop – It is when most economics activities for a location come to a sudden stop due to a financial or natural disaster. In most cases such sudden stops are local such as due to a flood or an earthquake.
Global sudden stops are extremely rare and have happened only during the great depression in 1930s and 2008. Even during wars, we do not have such a situation.
The current crises has the potential of an economic sudden stop (and may have started). I have been thinking of this risk (which I have been referred to as a Tail risk). Over the weekend, I drew the following crude picture to illustrate my hypothesis (please excuse my drawing)
In view of this risk, I decided to analyze all my positions for bankruptcy risk. I wanted to assess how long the companies in my portfolio would survive, if there was complete stoppage of business (revenue = 0)
I am attaching the analysis below. Please note all companies in the note are for educational purpose only. Also we don’t hold these stocks now.
“It’s not supposed to be easy. Anyone who finds it easy is stupid.” – Charlie munger
Investing is very easy when you are investing in a bull market. If you are ‘unlucky’ to begin investing in a bull market, you start dreaming of being the next Rakesh Jhunjhunwala or Warren Buffett
I used the word unlucky on purpose because every new investor who starts investing in such periods gets a rude awakening in the next bear market
Bull market stories
A common theme during such periods are stories we hear from people who are striking it rich at such times
US covid Tech boom
“Buy quality at any price”
“Chor bane mor”
Secular growth of financial services
Perpetual growth in Infrastructure
The last one was in fashion in 2006-07 when a lot of current investors were not around
What happens at such times is that investors fit a story to the price action and think of it as a law of physics. These stories gain prominence as more investors get sucked into it. Eventually the trend runs its course and a lot of investors are left holding the bag when it eventually turns
Beating the market appears deceptively easy
Can you think of any activity in life which pays well, is competitive in nature and easy all time ? Is it easy to be a doctor, architect, actor, chef ?
Investing seems to be the only field where a lot of people get fooled into thinking that its easy. The reasons are not complex to understand
For starters this is a probabilistic field with returns accruing in spurts. A 15% CAGR over 10 years is not spread evenly over this period. Its more like +25%, +10%, -15%, + 18% and so on. Anyone who invests during a bull market thinks of it as normal and tends to extrapolate it
During such bull run making money appears to be easy. Just buy whatever is in fashion and it works. No need for any kind of risk management
Its easy to trade and getting easier by the day. Open an account in a few days and start trading in F&O. A thousand rupees is enough to get started. There are no qualifications or gate keepers to stop you
Performance over the cycle
Anyone can be a bull market genius. The true measure of performance is over multiple cycles which include several bear markets
Most investors get washed out after a bear market, never to return back. The few who stick around, dig deeper and learn the craft of investing. Even so, this does not assure you of above average performance
The reason for it is that the basis of out-performance changes over time. What worked in early 2000 does not work now. As I look back on my old posts up until 2013/14, it was easy to buy good quality small and midcap companies at cheap prices to make multi-bagger returns. That game is over now
In the same manner, quality at any price worked in the 2015-18 period, or loss making tech companies were the go to place in 2020. A lot of investors tend to stick with the old theme even when the paradigm has shifted
Beware of the snake oil salesmen
If you want to do well over the long run, you have to overcome your natural biases which trip most investors. One has to un-learn and relearn every 3-5 years as the paradigm shifts. If you miss one, then be prepared to live through a period of under performance till you adapt to the new one
That’s the reason why a lot of successful long term investors have said: Trading or active investing is a tough way to make easy money
I can vouch for that. I have worked in the corporate world and invested actively at the same time. I can tell you that making a living from the stock market is much more difficult than a full time job.
So anytime someone tries to tell you that beating the market is easy over the long run, keep these points in mind
They are trying to sell you something which is not worth buying
I am most proud of an investing decision I made years back.
Let’s go the beginning.
I have been investing for last 20+ years. In the initial years, I was fumbling in the dark and trying figure it out. I had several failures and lost a decent portion of my tiny net worth. Over the years as I gained confidence, I started investing more of my net worth in stocks and moved out of mutual funds entirely by 2009. I launched the advisory in 2011 after investing my own money for 10 + years.
During the initial I did not invest a single penny of my mother’s money as I did not want to risk her hard-earned savings on my trial and error. However, by 2011, her savings were dwindling as inflation was eating into it. The interest on her savings were barely enough to cover her expenses and at that rate, she would have run out of money in the next 7-9 years.
Now you must be thinking – That’s what kids are for. I should be taking care of her to which I wholly agree. However, this line of thinking misses a key point – Independence and choice.
Fear of markets
Our parent’s generation is over cautious and conservative. They consider the stock market to be a risky place and media doesn’t help the cause. As a result, most of them invest mostly in fixed income. In doing so they take on a different risk – loss of purchasing power due to inflation.
This fear may not be rational, but you cannot blame them for it. In the 80s and 90s, the Indian stock market was poorly regulated with brokers often cheating their customers (it happened to me a few times). No wonder the earlier generation has been wary due to the speculative cycles and poor regulation of the past.
Instead of wishing the problem away, I tried my best to give psychological safety to my mother when I decided to invest for her
This is what I did in 2011.
Invested 50% of her net worth, same as my own/ advisory portfolio.
Reduced the withdrawal rate from her accounts to bare minimum and covered the balance.
Have not withdrawn anything from the portfolio and let compounding do its magic.
Promised to backstop her portfolio. I would cover any losses personally.
The last point was the key. It ensured that she would not lose money if I made poor decisions.
In the last 12 years, her equity portfolio is up 13X and is 80%+ of her net worth. The dividend income alone can cover her expenses.
There is a joy in having enough money of your own so that you don’t have to depend on your children. I continue to take care of her, but my mother knows that she doesn’t need it and she has a choice. She can ‘choose’ to spend her ‘own’ money as she sees fit. It’s a different point that she has limited needs and spends most of it on her kids and grandkids.
I cannot be prouder of this achievement. I can sense the satisfaction she has from knowing that she has enough to spend as she wishes and not depend on anyone.
If you have older parents, I suggest putting at least a small portfolio of their net worth in mutual funds (if you don’t invest directly). At a minimum, this money would act as an inflation hedge.
However, remember to manage their fears and caution about the stock market. Preferably, start small and earn their trust over time. Finally, be conservative and risk averse with their money.
Believe me, in 10 years you will be glad that you convinced them to do it.
In my 2022 year end note, I spoke about some changes in my approach and using stop loss to manage the risk.
These changes are by design and have not been done lightly. I have always resisted chasing performance based on the latest fad of the day. However, my failures with a few positions such as PEL, Edelweiss and Shemaroo made me question the process and look for my blind spots.
When these positions declined, I dug deep into the financials and thought a lot on it, but could not find a clear way to answer the question – do we sell or hold? The numbers looked good and so we held. It turned out that the market had already anticipated the collapse in the earnings.
That has led me to a 3+ year journey of understanding technical analysis, momentum, factors in investing and so on. As I have studied these other areas, I have adapted my value approach to fit the changing market structure.
10-15 years back, markets were slow in responding to earnings miss and business cycles. These things have changed considerably now. Markets react much faster now – mainly due to higher competition and automated algorithms. In effect the time horizon of markets is shifting.
I have now blended momentum and Technicals to my value style. The core focus on value and long-term value creation remains, however, momentum sometimes acts as a booster and Technicals are more like a trip wire to alert us
Purity of style
I have practiced value investing for 20+ years now. I used to wear it as a badge of honor and made it a part of my identity as an investor. Even my blog is titled valueinvestorindia.com
It is time to go beyond that.
I am not talking about switching from a long term buy and hold to swing trading. However, being religious about my approach is not the way forward. I have belatedly realized that other approaches to investing have their own strengths & weakness and adapting some of these strengths to our style strengthens it.
For example: Risk management is a strong point of successful traders and blind spot for buy & hold value investors like me, who believe in holding a stock forever irrespective of losses.
In a similar manner, momentum/quant investors have simplicity of approach in their favor. Their approach can be boiled down to a few bullet points and easily automated. Value investors like me have layers and layers of complexity. I have used this mindset to strip away the non-essentials.
For example: Over the short-term valuation and management quality are important but not critical. Overweighing this information, which does not add to returns, means we have missed out on good ideas with a 1–2-year time horizon
Stop loss and zone of action
I spoke about having stop loss for each position in my last update. I review the stop loss regularly but will not share it with anyone. The reason for it is simple – I want to retain the flexibility to change my mind.
There is nothing special about the stop loss. It is based on a blend of fundamentals and technical factors including max loss or downside. In case of long-term holding, the stop loss is wider than a trade as that is a position we wish to hold longer.
As long as the price is above the stop loss and I am comfortable with the long-term fundamentals of the company, I will not react.
We cannot react every time the stock drops or rises a few % points. On the other hand, we don’t want to ignore a 20%+ drop, which we have done in the past. A few % change matters for a swing trader but is noise for us. However, a 20%+ drop means that there is something occurring at the company or sector level and a lot of investors including traders are exiting the stock.
At such points, we need to react and make a decision. Are we ok with holding the stock for an extended period and bearing a much larger loss or should we exit and live to fight another day. On this count my thinking has changed. I would rather take a hit to my ego and come back to the position another time.
Evolution
I rarely talk about the macro conditions. It’s not that macro is not important, but there is already enough noise and drama around it
For example – The fed or RBI decision on interest rates is the same for all financial service companies. What’s the point of talking about it? A good financial institution will figure out a way to work around it. HDFC bank has performed well over 30 years even as PSU banks have faltered. Surely it is not because of the interest rates.
I want to focus on what matters for a company and how it can do well in the long run. In the same manner, I want to do the same for us when writing to all of you.
My investment approach and framework will have a lot more impact on our relative returns than the macro. If the world has a major event, such as COVID, all investors including us will be impacted. Our approach will however decide the level of impact.
I spoke extensively about the evolution of my investment approach in this podcast. You can review it if you are interested.
A long-term partnership
We repeat this every time in the portfolio review and will do so again (more for the benefit of the new subscribers)
We do not have timing skills and cannot prevent short-term quotation losses in the market.
Our approach is to analyze and hold a company for the long term (2-3 years). As a result, our goal is to earn above average returns in the long run and try to avoid losses during the same period.
Despite our best efforts, we will make stupid decisions and lose money from time to time. We feel the same pain as we invest our own money in the same stocks.
We will treat all of you in the same manner as we would want to be treated if our roles were reversed. This means that we will be transparent and honest about our actions even when we have made a mistake.
Disclaimer – Stocks mentioned in the above note are for information / illustration purposes only. This is not a Buy / Sell recommendation.
Let me share two personal stories, one recent and another from 25 years ago.
I have a relative who recently passed away at the age of 50 due to a heart attack. He had a very stressful job and was facing financial pressures as well. After losing his job, he found himself short of money, and it seems (though I don’t know for sure) that he thought an easy way out of his financial troubles would be to trade in the stock market.
He lost his savings and sunk deeper into debt. I am certain that all these stressors took a toll on him.
The second story is even closer. This is the story of my own father, who passed away around the same age as this relative. I have shared this story here. He lost money with a plantation company, and when I visited their office, I was told that the money was gone. I can never forget this episode in my life.
Have a Heart
I recently posted a tweet when a bank in the US collapsed
If one invests in a ‘teak’ company or in the stock market, the person may have some idea that they are taking a risk. However, when a depositor puts money in the bank, they are NOT putting that money in with an upside
I received a few replies back, saying that such people do not deserve to get their money back if they did not analyze the bank’s financials before putting their money in. I have analyzed banks for 25 years and am sure that I know more about banks than these folks. Barring a handful of analysts or insiders, no one, including the top management, can tell you with certainty that the bank will not fail.
You have to be a heartless !@@### (insert your choice of word here) to make this statement.
I have been very numbers-driven throughout my investing life. However, there are areas in life where I draw a line. The safety of a person’s life savings is one of them. You can never understand the despair of a person who has lost his life’s savings
Implicit trust
There are vehicles such as bank FD, government debt, Debt mutual funds etc which have an unwritten safety/guarantee implicit in them. If you make every depositor or investor read the 100 page prospectus or study 10 years of financial statements, the system will come to a grinding halt
Our world works on implicit trust and not everything can be driven by contracts or due-diligence. Do you check the safety certificate of a plane or its maintenance manual before boarding a flight. We implicitly trust the system to make flying safe for us
If a plane goes down, we don’t blame the passenger for it
Even if you don’t consider the humane aspect, you will realize that if you do not the guarantee deposits, the whole system will collapse
Don’t believe me? read about the banking failures of last 100 years and you will understand why regulators and government rush in to protect depositors. Hint: they did not in the 1930s and that led to the collapse of the US economy
Are more regulations the answer
There are a lot of regulations from SEBI, and these keep growing by the day. My partner, Kedar, carries all the burden, and it is tough to keep up. However, considering the number of bad actors and terrible advice on social media, I personally think that’s a small price to pay (for people like us)
Bad faith investment advice and get-rich-quick schemes are not harmless gimmicks. They cost lives and destroy families.
I was in college when my dad passed away unexpectedly.
It was a shattering experience and only those who are unfortunate to experience it early in life can relate to it. Your notions of stability, risk and how you see the future changes completely
As I came to terms with his death, I was forced to deal with my family’s finances. This was the start of my investing journey. Till that time, I was never bothered about money, much less about stocks and bonds
We were financially insecure and that feeling drove me to learn about money & financial independence which led me to stocks, Warren Buffett and so on
I cover my initial years of investing in this video
A lot of time has passed since then and I have done well beyond my expectations. However, I don’t think my world view has changed. Such events influence your thinking on risk & money for a lifetime
I often chuckle when I read about some formulae on risk and all kinds of mathematical approaches. These formulae are without context and designed for some hypothetical person with no emotions and life experiences.
We all go through different life experience and our notions of risk, money and future are different. My own life experiences means that I will always remain a financial chicken all my life
I wrote this note to our subscribers today. Hope you find it useful
At the height of the epidemic, I shared my thought process on the next steps
How does one invest under such extreme uncertainty? One option is to assume that there will be a quick recovery and go all in. The other extreme is to wait till it is all clear and then deploy the capital. In the first approach one is making a bet on a specific scenario which may not occur, leading to sub-par results. In the second case, we may end up with sub-par returns too but only because prices will adjust once all the uncertainty goes away.
We paid a price for being conservative. We lagged the indices in 2020 at a time when others rode the surge in small caps and achieved stellar returns
I wrote the following at the end of 2020
At that point of time the future was uncertain and anyone making a specific bet was ‘assuming’ a specific scenario. If we assume that 50% of the investors bet on rapid recovery and the other 50% bet on the whole thing dragging on, the first group turned out to be right.
You are now hearing from investors who went all-in, in the month of March/April. It could have easily gone the other way and in that scenario, the second group would be highlighting the merits of being cautious, whereas the first group would be silent.
I personally avoid taking a specific view of how the future will unfold. The risk of doing so is high, if you get it wrong. If you are managing money for others (like me), then the risk is asymmetrical. If you get it right, you can tout your performance. If not, then your investors bear the brunt
I continue to stand by my conservative approach, though I should have reacted faster when all central banks pumped in a huge amount of liquidity into the system. By the time, I could appreciate the dynamics, it was too late
I have been following this drama closely and by mid of 2021, felt it was getting crazy. Valuations of profitless growth companies in the US went through the roof, Crypto was all rage and then we had the NFTs.
Some of these innovations could change the future, but why would I pay for a promise? If you are a buy & hold buyer (as many claim), then you should be paying a price which doesn’t discount the future. On the contrary at height of the mania, buyers were paying for the most optimistic future
The last one year has reminded me of the 2000-2001 dotcom mania. I had just started investing and resisted the mania for a long time, but finally succumbed to it in early 2000 when the bubble peaked. I promptly lost 80%+ of my meagre investments in the next few months
The advantage of experience is that if you can avoid repeating the same mistake. I have stayed away from all this madness and just watched it with amusement. You can see all the updates on my twitter feed @rohitchauhan
When the tide goes out
I created a presentation last year but did not upload it then for some reason. Interest rates have been on a 40 year downward trend and were close to 0% (and even negative). The investing world has gotten so used to this zero cost capital, that even a slight increase would be devastating to most assets
Although I could not forecast inflation and other macro issues, it was clear than any normalization or even reduction in the liquidity was going to be a problem for the market
We know what has happened since then – Inflation has surged due to war, supply shortage of commodities and all kind of supply chain issue
The net result is that interest rates are rising and have some distance to go. All central banks, including RBI have to raise interest rates and reduce liquidity to control inflation
Flip the script
So what’s my point in all this ? We all know what is happening.
If a cut in rates and increase in liquidity, resulted in a V shaped recovery, then the reverse should cause an extended downturn?
I think a lot of the correction has happened. However that does not mean markets cannot shoot on the downside. Long term investors often ignore the implications of liquidity
The net result is that the tailwinds of the last 2-3 years are now headwinds. If this turns out to be true, then there is no central bank to bail out investors this time around in the near term
Hunker down
My thinking is colored by my experience after the dotcom bust. As liquidity was pulled back, it took the markets years to normalize and start growing again. The current events are not the end of the world. At the same time, we should not expect that market will turn suddenly and resume their upwards trend
We are holding 20% cash as I write this note. My plan is keep looking for new opportunities (as always) and start with small positions. As these companies execute, we will scale into the position over time
Even as we invest and reshuffle our portfolio, we should expect losses in the near term. No amount of conservatism can save us from that. I have harping about diversification and asset allocation for last 2 years as I felt that a lot of the recent rise has been due to liquidity conditions around the globe
We can expect volatility and a tough slog for some time. The key is to manage the risk and focus on building a diversified portfolio
