US Fed has hiked interest rates
Modi has won UP elections with a thumping majority
RBI is cautionary in tone with respect to inflation and rate cuts
With all these events, how do you see the markets unfold till 2019? How and where should I invest if I have a lump sum for the next 2 years?
FYI, I am regular investor and have investments in Direct equity and MF (large, mid, balanced).
This is a question from an investor.
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Dear Investor
As far as my market knowledge goes, I don’t know nothing. I also didn’t know about the market 1 year ago, 5 years ago, 10 years ago and I don’t know today as well.
How will the markets go from here on? I don’t know.
The list of events you have mentioned are very recent. Much worse has happened in the past and a lot of good too.
Elections, budgets, wars, epidemics, what not, have happened before. There have been coalition governments, various prime ministers, presidents, economic policies, Demonetisation, etc. All of these are likely to happen again as well.
Interestingly, the markets have by and large ignored each of these events and continued to move on.
But it appears, you are still stuck.
For instance, you were waiting for the March 11 election verdict to know which way the markets will move and accordingly position your investments, hopefully looking forward to a fall.
Alas, I am sure like many others you felt a little disappointed too.
I was at this cafe earlier this month, a few days before the election results. I over heard a middle aged guy speaking with his friend, almost boasting, “ I have set aside 15 – 20 lakhs. The market is going to drop at least 1500 points. And then I will enter. I know what I have to do and what I have to buy.”
I assumed he was talking about the stock market.
How tragic he must be feeling!
He will enter still but at a price much higher than what he expected.
Coming back to you, now you see hope with a clear verdict and want to profit from it.
Now, you are asking me for advice as to what to do. Unfortunately, I cannot give you advice on the basis of what you have shared.
Investing is a very personal act and it is difficult to dole out any advice without consideration of an individual’s complete profile.
It is like a doctor prescribing an aspirin as soon as he hears about a headache. It could be detrimental.
While markets provide us a platform to buy and sell, I don’t see them (or may be I fail to see them) as any sort of an indicator per se. The markets with their own whims and fancies have fooled many a people. They don’t care about the government, natural calamities, your goals, expectations, anything for that matter.
You can have expectations with each asset class based on their inherent characteristics and history, and then design your financial and investment plan accordingly.
The events that you have mentioned don’t really matter to you. Your investments have to be driven by your goals, your current investments, risk tolerance (how much you need to take vs how much you are taking), target rate of return, etc.
If you are sitting on a large sum of cash today, invest it as per your goals and asset allocation. If your portfolio needs more equity then invest accordingly. If it needs fixed income/debt, so be it.
The asset allocation will help you win more than market or performance chasing.
I could be wrong but that’s what I have come to understand in my limited experience.
Here are some notes you might find useful.
How much returns to expect? From Equity, Fixed Income using data and past experience.
STP or lumpsum? STP has been nice marketing. See if you still see some sense there.
And if you feel you can’t take the decision yourself, then don’t hesitate and go to an investment adviser.
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Sant Kabir said something very beautiful, “do patan ke beech mei sabut bacha na koye”. Nothing stays intact in the duel of the milling stones.
If you have seen a old style milling stone, there are 2 stones – one over the other. The grains used to be put into for grinding through a small hole at the top and the upper stone was moved round and round with a handle. I have done that as a kid.
This doha has a philosophical meaning. Kabir refers to duality – we stay on the earth but we desire for heaven.
You get the drift, right?
In Investing, the two stones are greed and fear. When events lead your mind, you are running into the milling stone.