Over the past one-two month, the markets have witnessed a massive rally while investors anticipate a correction. I have redeemed 25-30 per cent of my portfolio, where I have achieved my targeted returns, and now I am sitting on cash. What should be my strategy now?
- SP Jain
Yes, this is a problem faced by several investors, and there is no solution to this. It is good that you have redeemed just 25-30 per cent of your portfolio. Several investors had redeemed 50 per cent, 75 per cent, or even complete portfolios last year and were waiting for a correction in the market. They had to keep waiting as the markets did not witness any significant correction.
If you are looking for an indication that I may have about the market movement, then let me tell you, I wouldn't have been answering your queries had I known this. Instead, I would have been doing something else. I have been in the mutual fund industry for the past 30 years and have been closely looking at fund managers. While fund managers are broadly right about market movement, being precisely right about the market's direction is very difficult. Hence, I have not met a fund manager who can specifically tell the market's direction.
You would see that even the dynamic asset allocation funds that are based on the very principle where the fund manager will decide the asset allocation into equity and debt have not been able to deliver extraordinary returns if you look at the past 5-10 years' performance. This proves that the most capable fund managers with great track records have been able to choose great companies and stay invested in them even when the market is against them. Hence, they made money for investors based on long-term orientation and choice of companies. But no fund manager has been able to make money based on timing the entry and exit of the market by being able to judge precisely the market movement. So you should also stay away from such practices and stay put, irrespective of market movement, to make money in the long run.