Base Rate Investing: The Smart Investor's Secret

Base rate investing offers a distinct advantage to investors encouraging them to look beyond the noise and focus on underlying fundamentals and longterm trends. The article explains how by understanding and applying this strategy effectively, you can make informed investment decisions and potentially outperform the market over time

You are feeling exasperated, not due to age, but because you have been pulling your hair out in frustration. A few months back, you subscribed to investor services from a renowned publication house based on a promise they made - a monthly recommendation tailored to your chosen investment themes, focusing on fundamentally strong companies. The salesperson painted an enticing picture, touting the research company's stellar background and emphasising their purported long-term approach. Like clockwork, they pledged a dedication to avoiding losses (as though anyone aims for the opposite!).

They even boasted of a strategy mirroring that of ace investor Warren Buffet - buying when others sell. It sounded familiar, a spiel you had probably heard countless times before. There was sincerity in their delivery, or perhaps it was just a convincing act. Now, a quarter has passed, and you have invested in three recommendations given by them. At the end of the quarter, the value of your investment to the tune of ₹300,000 stands at ₹280,000. You know that the market has been a bit weak lately due to the ongoing war between Russia and Ukraine, and so you ignore the minor loss. You are a patient sort and don't fret over the value of your investments daily like many of your friends.

But when you check your investments the next quarter after you have acted on three more recommendations, you see that the value of your portfolio is now only ₹510,000. You have taken a hit of 15 per cent in a couple of quarters. To rub salt on your wounds, they have given other recommendations you are entitled to and you have to act on it. One more month goes by, and you are aghast to discover that the value of your investment is now down 30 per cent within seven months. Ridden with anxiety, you write to the company about the sorry state of your investment's performance. You get a very mundane response from them.