The above question can be framed differently as “Do I wait for next Downturn for Cheaper Valuation?”
When you are building your portfolio towards a long term sustainable wealth creation, there are multiple aspects that you need to focus on. As individual investors, it is very easy for us to get carried away with the individual stock wins. But when we look holistically, including wins and losses, then we realize who is the real winner. That’s why I say, for DIY investors, sustainability is key in portfolio management. Over the years, all the retail investors I have interacting with, most of us focus too much on stock picking, or stock selection. This is similar to what an employee does of executing blindly now knowing how it is related to overall company strategy.
The first lesson you should learn in investing is “not stock picking”, but how you can maintain and sustain what you have (safety of capital). By this I do not mean going with bonds, FDs, or government certificates. What I mean is invest in a way, where you believe there is relatively less risk of losing your capital. Continue reading rest of this article…
One of the most neglected aspect do-it-yourself investors is performing a realistic assessment of their portfolios. I have adopted a very disciplined approach to make sure I follow my quarterly regime of reviewing the progress. First step was to check out the status. Second step is to understand risk, and third step is to make changes (or execute or re-balance if necessary).
Any investor investing for long term (i.e 10+ years) must use the principles of asset allocation and diversification in their portfolio management process. These are two aspects that help investors to manage risk of investments. This has been said many times, presented many times, and we individual investors still continue to make mistakes. On a personal front I have been guilty of it in recent past. Both asset allocation and diversification are two different aspects and hence they have different objectives. The primary reason individual investors get exposed to downside risk is because many are unable to differentiate between these two aspects.
Any long term investor will know that they need to manage risk in their portfolio. The way individuals should manage their risk is asset allocation and diversification. Today, I am discussing how I manage risk in our income portfolio. The objective of this risk analysis is to make sure that TIP portfolio is not exposed to any particular event, or company, or any other aspect that will affect portfolio performance. 
Reflecting on My Investment Year 2008
Reflecting back on Year 2008, I think it will go down in history as a very significant turning point in the global economy. I also think that, due to events in Year 2008, other developed economies and emerging economics will evolve in different way. By different way I mean with reference to how it interacts with US economy. For the last few decades US economy was the engine of growth for global economy. US economy with its ingenuity, entrepreneurial business environment, innovative mindset, institutions, and rule of law was the global consumer. The other economies were happy being the supplier. Moving forward, this status will be challenged depending upon how US policy makers deal with the aftermath of events in 2008. While US business environment is still very much entrepreneurial, it remains to be seen how it will adapt to the new economic environment. History shows it has always adapted. Time will tell if it does this time also? By no means I am professing dooms day scenario, all I am saying is things will be different than what/how it used to be. How different, I do not know. Continue reading rest of this article…