March 15, 2020
In May 2017, at InvestmentMitra we advised caution on lumpsum investments into equity. In our communication Is Stock Market History Repeating we had found similarity in pattern that developed during August 2007 & January 2008. It repeated, with markets giving good returns against high valuation and then falling freely on introduction of long term capital gains tax on equity.
Since then it is almost three years and we at InvestmentMitra always took cautious approach while investing even for long term by investing money majorly in balance advantage and balanced funds. All thorugh this period it was only in October2018, March& August2019 we found equity markets to be little attractive with advising profit booking in April2019 when markets spiked too fast with no support from fundamentals.
In our communication Green Shoots in Economy & Coronavirus – Should you invest in Equity on 16th February, we talked of possibility of Coranavirus turning out to be a Black Swan event and cautioned you against investing into equity. We cautioned you again in our communication on 24th February. In our communication of 1st March, we advised you to start looking at your portfolio and scope of rebalancing by moving investments from other asset classes to equity.
Over long term, equity as an asset class outperforms all other asset classes, this is a proven fact. But it is impossible to predict markets perfectly for anybody in the world. We only study fundamentals and apply our logics to decide whether we should go all out in equity now or take cautious approach for the time being. At InvestmentMitra we had always been very conservative while advising investments to our investors as we find ourselves incapable in chasing the best returns. But now we strongly believe that it is time to be aggressive.
Has everything come under control – NO.
Will markets will not fall further from here – We don’t know
What we know is that presently markets are attractively valued and you should put at least 60% of your long term funds at these levels. If market goes down further you have another 40% to take advantage of and if markets stabilizes around current levels, you can start increasing exposure to equity on confirmation of consolidation.
“There are two concepts we can hold to with confidence:- Rule No.1 : Most things will prove to be cyclical. Rule No.2: Some of the greatest opportunities for gain and loss come when other people forget Rule No.1”-Howard Marks
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Happy Investing!
Team InvestmentMitra