Thread by @IamMisterBond

Let me now share my thoughts on Equity Investing. Though current Equity Market crisis is attributed to CORONA VIRUS; according to me it is a combination of both CORONA VIRUS as well as excesses of the Equity markets over past 3 years due to Bubbles created thru excess Liquidity.

#MutualFund Industry has given 3 Mantras: Buy and Hold, SIP Karo Bhool Jao and Do Not Time the Markets.
If Buy & Hold was working then how come Investors stay invested only for 2-3 years in Equity asset class? After some time, SIP portfolio is nothing but Lump Sum.

It is #VOLATILITY which is becoming enemy of #Investors instead of it being their Friend. In fact, wealth is created through SIP, STP & Asset Allocation only because markets are Volatile. Will anyone adopt above strategies if markets were linear?

Look at this data and let me know whether one should or should not time the market? This data shows investments at different levels of NIFTY PE and holding it for 5 years thereafter. Average Returns in Green Zone: 26%, Yellow Zone: 15% and Red Zone: 8%.

Should one not time investment level? NIFTY has delivered negative returns over 5 years when an Investor has invested in Red Zone. 80% Investors invest in the Red Zone and only 1% Investors invest in the Green Zone. This is the GREED and FEAR story of Investors

Why is this happening?When markets are cheap;which means they have corrected from previous highs;investors were fully invested in RED Zone and have now lost money. They do not have guts or funds to invest further. They were told to invest at any levels of the market & stay put

As against that, if they were following Valuation based strategy of investing/disinvesting i.e.Asset Allocation strategy;in all probability – they would be sitting on cash in RED Zone that would get deployed when markets correct and go to Yellow & Green Zone. Buy Low - Sell High

Now lets talk about some of the narratives of past 3 years:
1)Markets are rerating. Higher PEs are the new Norm
2)Market is Polarised due to 10-15 large cap stocks doing well
3)Now Large Caps are over stretched but Mid and Small Caps are fairly valued
4)Invest in Mid & Small

Reasons for these narratives were nothing but excess liquidity getting pumped into the Markets even thru MF route. Rs.9000 crs of monthly SIPs. Did FMs have any choice but to buy? Naturally, higher PE became new norm (temporarily).

Due to Polarisation; if Large would correct-can Mid & Small Caps have their own rally? Why was investment call given in Mid & Small Caps when Large Caps were extremely overstretched? Now blame everything on CORONA Virus?

For past 3 years: since July 2017; I have been crying hoarse to stay in conservative asset class like DAAF & stay away from aggressive investment calls in Equity as an asset class. Unfortunately, due to Polarisation, markets perceptibly seemed to be touching new highs.

I was one among very few who has been vociferous in speaking about Exit Startegy form Lum Sum or even from SIP. Please remember, after some time, SIP is nothing but Lump Sum and needs to be protected from Downside.

Less the drawdowns, faster the bounce backs. Do not forget this

What are the lessons learnt from this crisis:
1.Should you stick to old Mantras like #BuyandHold, #SIPKaroBhoolJao and #DoNotTimeMarkets?
2.One should not bracket #Investors but bracket strategies as #AGGRESSIVE or #CONSERVATIVE based on Market Valuations

3. As Advisors concentrate on Downside Protection first
4. Move away from Market Cap Bias. Let FM decide on Large, Mid, Small cap allocations
5. Stop following EXPERTS blindly and apply #LOGIC & #COMMONSENSE
6.Be #PROACTIVE & not #REACTIVE

Finally remember these Mantras of #MisterBond:
1. Concentrate on Downside Protection
2. Be in the Right Asset Classs at Right Valuations
3. Do not be part of Herd Mentality of Investors
4. Follow PROCESS & DISCIPLINE