Strategise & Structure
A new high or a new low are not mere benchmarks. They are milestones around which investors reinvent their expectations. A new high catalyses over exuberance and breeds optimists by the dozens. A new low triggers more converts to the pessimists’ camp. Gold hit a 10 month low this week and global optimism around the metal are clearly ebbing. But, India has her own behavioural asymmetry when it comes to gold. Investors actually believe that one can never lose money in gold. They don’t calculate or compare returns from gold with the relatively risk free benchmark which is their overwhelming favorite – The Fixed Deposit. But, they always bring up the comparison between the FD & equity. 2013 seems headed for significant under-performance by gold vis-a-vis the FD. Like the proverbial ostrich ,domestic investors have been buying gold regardless of the price or its trending returns. The pain will sink in only when things get worse. The more informed investors have lapped up huge volumes of structured gold products like ETF’s and are sitting on losses that may only widen. Unlike the fall in equity, the fall in gold will create wider pain.
The memory of people in the stock market is very short.
In equity investing,ordinariness comes with good reason. Investing on the basis of past performance ends up with very ordinary outcomes. Or, the outcome could be even worse. To make your investing out of the ordinary, you need to rise above the past and the present. Investing is all about the future. To bet on the future isn’t really easy. You need to read economic prospects right.When economies are in a phase of turbulence, it often becomes a leap of faith.Yet, that is what investors should learn to make. When will a leap of faith work? When valuations are modest, growth is returning and investment appetite runs low. The markets seem headed into such a phase. Being in the state of mind to make that leap is what investors must focus upon now. But, how can an investor translate his faith into actions? This bothers investors no end. Should it be a quantum leap or, will small increments work? That depends on your risk appetite. Lower risk appetite is best served by investing in small increments in a consistent manner.
Time to put strategy above tactics and look at the long-term opportunity.