Cycles, you have to love them !

Cycles, why I love them ?

Our clients know that I am most happy, when asset prices correct. While I don’t track markets on a regular basis (I have a basic idea where they are), nothing gets me more excited than they cooling off. The recent correction has got people excited, but it’s not ‘exciting’ yet. It’s good, it’s healthy, but it’s not mouthwatering. By no means, I  am recommending sitting on the fence and trying to time your entries. Calibrating the allocation and having a process is key. Bottomline : meaningful returns are made investing in these down-cycles.

Process

The process cannot be an afterthought. We therefore spend enough no of man-hours before we onboard a client onto the BuckSpeak platform. Mind you, a lot of these man-hours are spent by our team at the back- end. They curate the right asset allocation and understand each relationship’s risk profile. That’s why we remain boutique.It allows us the necessary bandwidth.

Possible shape of this one

Cycles are core to investing. For all we know, next 2-3 years might give sub-optimal return in equities. Nothing could be better. They had fantastic run post pandemic and it’s extremely healthy to have course correction. However, I don’t see a deep price correction (with all disclaimers in place), but more of a time correction (markets remaining range-bound for 1-3 years). One of the key factors is there isn’t huge euphoria all around. Examples like this point to an awareness of the tightening: https://www.bqprime.com/business/read-uber-ceo-dara-khosrowshahi-s-letter-to-employees-on-ipo-day 

The FD rate will decide your equity return

In the Indian context, another key event would be 3-year FD return moving to 7.5 % -8 % p.a. That’s when lot of money would move back to debt. Mind you, none of these are predictions, but merely hypothetical scenarios. We spoke at length about investor behavior in our last blog: https://buckspeak.com/blog/tina-the-term-to-remember/

Having said that, Indian economy is on a strong wicket. GST collections where at an all time high. Exports have done well. Consumer sentiment is at an all-time high.

P.S:  Investors chase returns 

As always investors have chased performance. Quant mutual fund has been ranking top in most of its category in the last 2 years. This has meant that, its assets have gone up the roof. Mind you their funds have existed for more than 20 years. Look at their no’s below, it would tell you a fascinating story:

AUM : Assets under management, basically the total amount of money being managed by the fund.

Most of the investors have only entered these funds, after they have seen (not experienced) major returns. This is not a comment on the fund’s quality, but just a statement on usual investor behavior.When the cycle changes, it would be interesting to watch behaviour of some of these investors. Will keep you posted.

In the meanwhile, enjoy the ride

Disclaimer : The opinions expressed in the Blog are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product.  It is only intended to provide education about the financial industry.  The views reflected in the commentary are subject to change at any time without notice. Image has been used only for representational purposes. While lot of care has been taken to validate the data , neither BuckSpeak nor any of its employees should be held responsible for its authenticity. Investments are subject to market risk , please engage with professionals to take better investment decisions.

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