Managing Portfolio In Times Of A Bubble

Even when the markets turn volatile due to various external factors, it is a proven fact that merely watching from the sidelines is of no help. During such times it becomes a necessity to adopt a strategy that will help you to mitigate downside risk. And one of the best strategies is to engage in wise portfolio management

- 

“The four most dangerous words in investing are: This time it’s different.” These were the words of John Templeton, a legendary investor, and mutual fund manager, who founded the Templeton Growth Fund. It is also said that more money has been lost due to these four words than at the point of a gun. Consider the ongoing scenario: the equity market has probably generated one of the best returns in the shortest span of time over the past few months. In fact, in the last five months, equity indices are up by more than 50 per cent. Record low-interest rate, dovish central banks, a gush of liquidity, and a vaccine on the horizon are some of the factors that investors believe to be different this time. This surge in the equity market is not something specific to the Indian equity market alone. Equity markets across the globe are rising in a synchronized way. If we take into consideration some of the major indices, our recent climb will actually pale in comparison. If we exclude the FTSE 100 of the UK, all the other major markets have outperformed us. In fact, our equity market represented by Nifty 50 was one of the worst-hit during the March 2020 fall and not the best to post-recovery.

Nonetheless, there are investors who are angst-ridden, worried by the fear that the party in the equity market could come to a screeching halt and that the fizz may dissipate soon. Extreme valuations, border tension against China and a month that is seasonally considered the weakest for equities provide ample reasons for an investor’s anxiety.