Everybody knows it. Almost nobody does it. ‘Buy low Sell high’ wasn’t meant for the theorists. It was meant for just about everybody, you and me. Yet, we didn’t get it right. Staring at a gold price of Rs. 25875, one can’t miss the irony. Most investments in gold happened around the top. It was ‘Buy high’ all the way. The ‘Buy High’ phenomenon only gets even worse when we study realty. Talking to investors at the market bottom in equity, one gets a sense that most investors aren’t really getting themselves to ‘Buy Low’. Why? Because, investors are actually trying to be superlative. ‘Buy Lowest Sell highest’ is what investors mostly pitch for. This pitch mostly fails because all investors do is wait until it is the wrong time. Masterly inaction at the lows is what most investors achieve. Another clear reason is that investors have obviously failed to understand that the best time to buy equity is when it is not even giving any returns. All this means is that the returns are waiting to be made. Surely, one can’t profit by waiting at that time.
A beaten down stock market can only be a happy hunting ground.
Investing in sunrise sectors has been a double edged experience for investors. Sunrise sectors provide the highest growth prospects on one hand and tend to also deliver the most investment failures. The reasons are predictable. High growth tends to give early believers multi bagger investments. This early evidence brings in more capital and this act as ready fuel for further growth. Capital is freely made available at very high valuations to companies in sunrise sectors. As the sector’s growth accelerates, valuations expand rapidly and capital tends to chase investment opportunities. This lead to a hyper active deal street and sky high valuations. At some point of time, growth slows or snaps. Inevitably, companies in sunrise sectors are ill-prepared to handle adversity as they have only prepared few good times. This leads to a collapse of companies as they run out of capital and doors tend to close on any effort to revive fortunes. Investment failure is almost preordained. Except the industry leadership, most players end up losing big money. The gold jewellery industry is the most recent example of this trend. Investors must set higher standards of excellence and look to buy at more modest valuation when they buy sunrise sectors.
Start placing bets on monsoon based themes. It will rain profits.