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Arun - Eighty Twenty Investor

@arun_kumar_r

23 Feb

1) When we start with Asset Allocation, actually we are already underweight equities (less than 100%) based on the % of temporary falls we can tolerate.

2) This default underweight does not require identifying 'when' the market will crash. But should be based on expectation (derived from history) i.e 10-20% temporary decline almost every year and 50-60% temporary fall once every 7-10 years in equities.

3) If markets happen to crash suddenly, our default underweight position (called asset allocation) will reduce the impact and debt allocation can be used to buy at lower levels

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Arun - Eighty Twenty Investor

@arun_kumar_r

29 Jan

Build a portfolio assuming we won't be able to predict and step out of future temporary declines.

1) Asset Allocation - Add Debt to reduce declines to a level that can be tolerated

2) Diversify via different investment styles (Quality, Value, Mid/Small, GARP, Global)

3) Rebalance Annually if equity exposure deviates +-5%

4) For large lumpsum inflows - Stagger via Time or Valuations

5) Automate monthly investments via SIP

6) Create a Bear Market plan to deploy money from debt to equity of market falls more than 20%

7) Bubble Zone Plan - To reduce equity exposure when valuations + earnings growth + sentiments indicate low future returns

fundsindia.com/blog/mf-resear…

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Arun - Eighty Twenty Investor

@arun_kumar_r

25 Oct 20

A superb recent performance may sometimes mask dangerous risk-taking. A dismal recent performance may sometimes mask a solid investment process and good long term track record. Differentiating both is unfortunately more art than science.

A thread on how to address this...

1) Consider full market cycle performance from peak to peak or bottom to bottom.

2) Check how did the performance occur - huge sector calls, concentration, mid & small cap exposure etc

3) Check downside capture ratio and declines vs benchmark in all major falls

4) Do you understand the process?

5) Do you have a rough quantitative/qualitative check for the process by looking at portfolios?

6) Will you be able to tell if the process is followed especially when a fund is underperforming?

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Arun - Eighty Twenty Investor

@arun_kumar_r

10 Sep 20

1) The real challenge in a bear market is that at some point, you will get fooled thinking, you should have seen the decline coming.

Then comes a stage when you think the markets will go down but don't act and it actually goes down.

This is where the mind games begin.

2) You predicted the market would fall. It fell exactly as you predicted!

If only you had listened. Regret takes over.

Looks like the market will fall again. History shows no one can predict. But f**k history. You predicted the fall.

You utter the most dangerous words...

3) "Let me exit equities and enter later"

It falls further proving you right. False Bear market rallies make you more confident on your prediction capabilities.

And finally the real rally starts amidst all the bad news. You think its yet another false rally.

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Arun - Eighty Twenty Investor

@arun_kumar_r

27 Jul 20

The policy response to the current crisis is unprecedented in its speed and magnitude. As a result, we have asset reflation in warp speed.

You can read the key takeaways from the recent Bridgewater note in the below thread..

bridgewater.com/research-and-i…

1) What took three years and seven months in the Great Depression took one year and six months in 2008, and only one month in the current crisis!

2) In the Great Depression, it took 3 years 7 months from Black Thursday before President Roosevelt broke the peg to gold, allowing the Fed to print enough to stop the free fall in equities and the economy, and the reflation continued for 4 more years before the next downturn.

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Arun - Eighty Twenty Investor

@arun_kumar_r

23 Jul 20

Here is a thread on evaluating Gilt funds:

For a detailed version visit:
fundsindia.com/blog/mf-resear…

It all starts with the simple question:

Is this the time to buy Gilt Funds?

Let us find the answer using different vantage points from 6 eccentric folks..

1)
QUICK GUN MURUGAN: Looks at problems using intuition, gut reaction, and emotion!

Reaction 1: Credit Risk Funds are going through several issues – defaults, downgrades, redemption pressure, illiquidity, concentration risk etc.

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