The biggest dilemma for equity investors witnessing a raging bull market is what more to do. Some want to enter the market out of envy, frustration & anger having failed in their previous attempts. Others who have made some money want to time the markets to perfection and exit at the highest only to re-enter when markets fall substantially. There are some interesting characters who just want to do something for the sake of doing something. To them not doing anything is a colossal miss of opportunity.
I call this “The Itch to Switch”. Believe me, this itch is not easy to go. It starts with greed or frustration and culminates with excessive disappointment. Sometimes it makes perfect sense to not do anything at all. The art of holding and not do anything is perhaps the most difficult choice to exercise.
Equity investors in India are in grip of this dilemma right now. While India story is real, growth is phenomenal, political environment is stable, demographics are favorable and reforms are palpable. International events are not as scary as they appeared to be few months back. Yet there is unease. The xenophobia is at its peak. Contradictions of thought is apparent. What if we miss out on participating in the further leg of this rally or what if market crashes tomorrow?
While we are often at the decisions cross-roads almost every day in our lives, a clear vision in your head provides the best road to our destination. Just sit tight, believe in your investment philosophy and more importantly in yourself. There will be temptations, fears, greed and noises. Ignoring them completely is the right way to go.
One great strategy during such times is to not go overboard and succumb to the itch. In such situations its even more pertinent to stick to your equity asset allocation. Don’t remain under or over allocated. If equity component in your portfolio has swelled then book to the extent you revert to the portfolio mean. In case you had just not participated enough then add equities to your portfolio.
While all boats rise in a rising tide it’s also important to park your money in the most stable and trustworthy companies. Error of judgement does creep in from time to time especially in bull markets. Ensure that your analysis is restricted to weeding out portfolio corruption.
What is to come, is largely unknown. One thing is certain though. A clear strategy and uncluttered mind will bring success, peace and joy. If you can hit with a straight bat then there is no need for a reverse switch. Itch with a smile not with a scratch!!
