WHAT AM I DOING IN THIS OVERHEATED MARKET

WHAT AM I DOING IN THIS MARKET

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Today the Nifty touched 10000 mark and promptly came down; The Sensex too has had a brush with the 32000 mark twice before it decided to stay above it for some time. Everyday different companies are touching their 52 week highs; even the duds which you never knew existed are being called chartbusters. It’s a mercy that such thing never happens in music industry.

Those of you who like to follow Economy and Finance through TV channels and various media forms may have heard that the market is in the “Over-heated” range. Knowledgeable people are becoming cautious; some are booking their profits and taking the money off the table.

Every morning, I am being asked the same thing- What Are You Doing in the current market situation ?

The question specially pertains to me as, I am held responsible for initiating over 500 collegues and friends , directly and indirectly planning their Financial future and Independence, over the past 25 years.

The answer however that I give does not satisfy many of the colleagues and they feel that I am hiding something and not giving some kind of a mantra.

What Are You Doing in the current market situation?- They ask!

Nothing –I reply! Absolutely nothing!

As most of my known people are aware – mine is a very unique and not a very enviable or “followable “- position.

I am about to be a 53 male- about to complete 3 years into retirement. I have no salary, income, pension, insurance, Ulip –Nothing. I just have a very primitive version of a health plan and a critical illness plan which would expire in another 10 years. So am I expected to, be doing in the current market situation?

Some people suggest that you could book your profit and wait for a lower level to re-invest.

Some suggest to entirely sell my mutual fund holding as this is the maximum that the market will ever get to.

Some knowledgeable people even suggest going into day trading of shares.

I would be very frank with you; I have always been a passive investor. There was a time when I claimed to be very knowledgeable about different stocks and I dabbled in them on a daily basis. However very soon good sense prevailed and I thought that this was not what I was trained for. My core competence lies somewhere else and I must concentrate on my profession.

 (I always hated professionals discussing stocks instead of their core knowledge. Discussing the Economy in a healthy way is fine, but talking about stock prices from the point of view of the frugal knowledge that they claim to posses, is pathetic).

From there on I started shifting my focus entirely onto Mutual Funds. I understood the dynamics of MF management quite early, and was reasonably happy that the Fund Manager was able to give a double digit- tax free return even in those days of double digit inflation. The engineer’s sense taught me that if I could “confidently” mobilize all my savings in this route- I could have a winner at my hands.

Such was my faith in the market that during the onslaught of 2008- I exposed myself completely into equity funds. My confidence of course came from the fact that I was working and earning.

So I can safely say – that even at that time I was doing nothing and even today I am doing nothing. That time I had the savings from the salary so I was mechanically investing with scant regard to the market situation. Even today I am staying invested with scant regard to the market situation. Yes I need some money for my sustenance, travel bug and other social activities that I am attached with. For that I redeem from my holdings a decent sum that can last me for about 4-6 months. Yes due to the run-up in the market the equity allocation had climbed up by 8-9% which I had shifted back to Debt- Gilt and Liquid schemes, bringing back the allocation to 80:20.

Some analysts may call a 80:20 allocation as too aggressive, but I don’t agree with that. Given my relatively premature retirement age and my spouse being even younger- I need my savings to at least last till the grave.

It is important to realise the fundamentals. We should not invest in shares of different companies or Mutual Funds based on the news that you hear. We should invest on our perception of our country and the faith in our Economy. Not even our perception of the government.

If we have decided to settle in this country, bought homes, property and other fixed assets ; we have done so with a eye fixed on the future of our country( Otherwise why are all our neighbors trying to make a beeline for US and UK?). Having decided (objectively and not just emotionally) to stay in our own country - now it should be the automatic next step to be a partner in its progress and gain out of it. Of course the automatic next step can be by keeping this money in bank deposits where you are taxed on the Interest Income or other Government mandated schemes (most which you are disallowed as NRIs). Another rational and objective choice can be to invest in Equity based instruments like Mutual Funds and actively see how you are performing vis-s-vis the progress of the country.

So don’t check on the Sensex every day. Behave like RIP Van Winkle. As long as you are working and earning – just keep investing the way you have learned. Follow laws of the land by paying taxes where and when required and keeping your documents updated. Don’t try to live in the India of 1990 and expect to have facilities like US in 2017. Today the world is truly getting unified. Most of the rules/laws will become universal in all countries. The FATCA/CRS form is just the beginning.