The end of a financial year is usually a time to take stock. Market volatility was high through the year. We saw equity sentiment peak in September only to turn into the lows of February. At the end of the year, gold and silver significantly outperformed equity. Most investors were hardly positioned for this.
How an investor positions himself for a financial year, is always an underappreciated aspect of investing. Most investors expect the market to align with their positioning instead of the other way around. Simply because an investor is heavily biased towards equity, it does not mean equity will reward him every year. There will always be years when the investor is very wrongly positioned. The market will punish the investor during such phases. But, if the investor has the resilience to hang in there till the tough times pass over, then he will be positioned to reap the rewards in full.
Even within equity as an asset class, how you are positioned counts. If you were overweight on small cap and midcap firms, the year would have been painful and tough. On the other hand, if you went overweight on select large caps, among which private banks which were out of favour at the beginning of the year, you could have even had a decent year. In the long run, all that matters is the ability to accept your positioning flaws and reposition yourself correctly for the next year.
Even in a year when you got the positioning perfectly right, you still need to approach the next year afresh. Well thought out positioning tweaks may be very useful when market sentiment shifts dramatically. But, in years when the markets trade sideways, the only thing that matters is the ability to hang in there without losing conviction. You should be able to do a few incremental things right and let your legacy decisions simply play out in due course.
Will the next financial year see a dramatic shift in sentiment, or will we see a sideways market? What you expect the year to be for equities should decide how you will position yourself.