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Time to Be Fearful?
May 15, 2017


The year was 2007. Sensex witnessed 47% year on year gains. It looked like there would be no end to the party. Some people even borrowed money to invest in markets, hoping to ride the future rally. And ended up getting scorched.

Lehman crisis struck. The music stopped. There were no big warnings or time to make sense of what had happened...or what was going to happen. By December 2008, the markets had fallen 52% YoY.

The reason I'm revisiting history is because I feel a sense of deja vu. It's 2017. The markets are touching new highs. Markets are awash with funds. Experts are justifying high valuations. The reasons are far-fetched - from GST to Make in India to a cashless economy. And retail investors seem to be falling for it.

One must note that currently, in most of the cases, it is liquidity driving the valuations, and not fundamentals. And this is exactly the time when one must allow fear to substitute greed.

Also, this is precisely the time when it is most difficult to overpower greed and stay disciplined.

Not for Rahul Shah though. In Microcap Millionaires, Rahul has set a process in place that allows no chance for the biases to creep in. And courtesy this process, some money has moved from stocks to fixed deposits. So, while he is exploiting the optimism by booking in profits, he is also prepared for the next round of a market crash, whenever that happens. When stocks crash, the Microcap Milliionaire team would be right there waiting to catch them with cash.

But how will that influence performance? As per the latest update, the total corpus (including the fixed income component), is up a strong 151.2% since inception (which was in February 2014). This is overwhelmingly better than the returns achieved by the Sensex, which is up by 42.8% during the same period. This takes the total outperformance vis-a-vis the Sensex to a fabulous 108.4%.

Data Source: Business Standard

This Chart Of The Day was published in The 5 Minute WrapUp - Justin Bieber Is Coming to the Indian Stock Markets

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