Some of you would have read the article/ listened to the video where S Naren, the CIO of ICICI Mutual Fund talks about the risks of SIPs in small caps. Don’t worry, if you haven’t followed this news. You are in good hands and you ain’t missing much in life :-). The video attracted disproportionate attention and social media algorithm meant, that the engagement multiplied.

I recently came across a book on nutrition aptly titled: Simple, Not Easy. It fits in so well for Investing. What makes it not so easy is the non-linearity. As humans, we love predictability, except in two scenarios: live sports and watching a suspense thriller. There’s also relevant work in behavioral economics, particularly by Daniel Kahneman and Amos Tversky, showing that humans tend to prefer known risks over unknown ones – a phenomenon called “ambiguity aversion”. This suggests we generally prefer predictable situations, even if they’re not optimal.

Hence, when a bump comes, we intrinsically don’t like it. However, at BuckSpeak, that’s what we have been doing for the last 18 months :

• Undeterred focus on asset allocation (we still add debt in our portfolio)
• Reduced our overall equity exposure
• Reduced our mid and small cap exposure, even at the cost of being labeled as conservative
• Stayed patient with debt and liquid

Deep down, we don’t mind investors panicking 🙂 ( obviously not BuckSpeak’s) . That is when wonderful opportunities are created. Think of

• Mid and small cap downside in 2018 and 2019
• Infra in the same period
• Large caps for the last 2-3 years ( 30-40 % lower return than Mid and Small Caps)

However, how we behave during this 20% would define our final outcome. Let’s brace ourselves for a non-linear ride.

Disclaimer: Any calculation shown in this post is only for illustrative purposes  and based on prevailing tax laws and the past performance of a fund or investment is not an indicator of it’s future performance. The data used in this presentation has been taken from several sources. Neither BuckSpeak nor any of its employees vouches for the authenticity of the data. Investing in mutual fund comes with market risk. Please read all Scheme Information Documents (SID) /Key Information Memorandum (KIM) and addendums issued thereto from time to time information and other related documents carefully before investing. Past performance is not indicative of future returns. Please consider your specific investment requirements before choosing a fund. Investment should be done in consultant with a financial planner/consultant, who would recommend products aligned to your needs and risk profile. There are no guaranteed returns.  Neither BUCKSPEAK NOR ITS EMPLOYEES, makes any warranties or representations, express or implied, on products offered and would be responsible for any losses from these investments. The company earns commission from Asset Management Companies when the user buys mutual funds. However, the recommendations on funds is not influenced by the commission earned