Presumption is dangerous when we try to predict the markets. When everyone presumes the same thing, the actual outcome often turns out to be the contrary. Most analysts believe the markets will rise to new highs in the first half of 2013. One finds very few contrarians on this belief. Fund flows of FII’s seem to also support this belief. Analysts believe that most negative news seems to be factored into stock prices. We feel that a lot of positive news are factored into stock prices.
It’s a long and winding road from skepticism to euphoria.
Consolidation is an important aspect of portfolio building. When the economic cycle is going down, investors must start building their portfolio for the next upward cycle. As the cycle bottoms out, the investors must take stock of what they own and assess if their portfolio already captures the future. Investors must ensure that they clearly know what they must own. It is important that they ensure they own what they have to. If their portfolio still has legacies of the past, it is important to restructure them and realign their investments. This exercise ensures portfolio consolidation happens. Consolidation significantly alters portfolio returns and investment outcomes. The difference in returns between portfolios which actively consolidate and those that don’t is very significant. Investors often commit the folly of believing that consolidation is relevant only for professional investors. Consolidation works for every investor if done with diligence and care. The time to consolidate one’s investments is now.
Buy into a correction. Consolidate your equity book.