Equity Markets- IPO-Mid
and Small cap: Why is it better to
underperform than lose money?
by Mr.
Suresh
Parthasarathy,
Many
investors believe wrongly that irrespective of how the economy performs, the
market will move only in one direction: upwards!
I
continue to be apprehensive about the state of our equity market.
Just
as in life, there are ups and downs in the market too. If you are rational, an
underperformance will not disturb you.
Just
look at an IPO of Rs. 400 crore that gets oversubscribed 180 times and collects
Rs.52,000 crore shows how market become mad. Anchor investors may make money,
but retail investors end up being stuck with stock..
Some
stocks today are flying high even though they lack good fundamentals, as money
chases the mid and small cap stocks.
Investors
pump considerable sums of money through Systematic Investment Plans into
mid-and small-cap funds. Some fund managers are a worried lot, but still accept
fresh money.
But
when investors such as you come to us, we are clear about one thing: we stick
to asset allocation instead of getting swayed by the way the
market moves and blindly rush into small- and mid-caps.
What
prompted me to write this newsletter is because a retired person who is short
of meeting his monthly income wanted us to invest more than 70 per cent of his
hard-earned retirement money into mid-and small caps. He wanted to withdraw
money from that every month to meet his shortfall.
His
argument without evidence was that such funds will outperform large caps funds
over a long period. But he failed to understand that any market movement will
not be a one sided and volatility is part of the equity market.
If
you let your emotions rule and invest irrationally, you may react differently
when the market turns in a short period of time.
 |
| Suresh Parthasarathy |
Liquidity
and valuations always travel in two different in direction and, at times, there
is even no justification for a rally in market. Yet, people often find ways to
justify the market movement.
Yet,
with all the analysis and research that my colleagues and I do, if we capture
80 per cent of the upside market movement, we are happy. We are rational
always and are ready to underperform during the last leg of the rally so that
we can preserve your hard-earned money during a correction when other lay investors
might be fearful.
So,
take our advice: You may underperform sometimes, but you will not lose money.
Investing is all about making money and not losing it.
Suresh Parthasarathy,
Registered Investment Advisor,(SEBI),
Columnist,
Founder,Myassetsconsolidation.
Mobile 98404 54737
CRISIL rating : MSE 3
| Skype: | suresh.partha |
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