Striking a balance in realigning portfolios

Striking a balance in realigning portfolios

Striking a balance in realigning portfolios


The rebound of equity markets from the March-lows was as stunning as the earlier fall

The rebound of equity markets from the March-lows was as stunning as the earlier fall. If the steep fall was less anticipated, the recovery caught most off-guard.

Particularly, the US markets have gone past their previous all-time highs with an increased participation across the spectrum of investors.

Though, domestic markets are a bit away from their historic highs, the amount of revival has been nothing short of astonishing. But that's how the equity markets work, if we look at history, predicting the next leg of action is almost impossible.

This period also has witnessed active inquiries from investors willing to take part in the current boom, it could either be out of pure FOMO (Fear Of Missing Out) or knowledge dawned about the fickle market nature, their experience would be known only in the future.

The market participants are facing different predicaments at this point of time broadly on three aspects. Investors, who have entered after the huge fall, are the ones who wanted to enter now after the confirmation of the rally and the ones who invested all through the cycle were exposed to market pre-fall levels.

I've utilized this space to create multiple literature on how to construct a portfolio, the various risks to consider, the biases to acknowledge and some useful strategies to tackle equity investing. Here, I wouldn't want to repeat all of it but would like to address the quandary facing these three types of investors at this point of time. The FOMO is the greatest envy the market creates.

Innumerable studies have proven that equity investing rewards those who are disciplined and FOMO just alters all the good behavior one has been associated with. For investors who're willing to take fresh positions or looking to plunge into the market, have to remember that the need to stick to the timelines is critical, come what may - the recent market behavior is a classic example of bust to boom in just weeks.

For those investors, who have begun exposure after the fall, their timing could have been never perfect. Here again, studies have proven that timing right is not always possible and the returns over a long period trump disciplined investing.

Many of these have experienced super-sized returns in a very short span of time, most of which were never discounted at the time of entry. For these investors, who have a portfolio and if all their components have given higher returns and thus not skewed their allocations then it's ideal to continue.

Of course, no one could predict the future, but if they find any stocks within the portfolio are facing headwinds due to the competition, technological change, regulations, etc., could trim their exposures by pulling down to the earlier allocation levels.

On the contrary, these very parameters are causing tail winds, they could increase allocations depending upon the available liquidity and risk appetite. The crucial part here is the portfolio creation and if one hasn't done earlier, it's time to organize this. One can't be lucky all the times.

Further, making an exit is always difficult as most are unplanned and this rally clearly surprised the most. The other way to address this is to pull out the capital and leave the rest. For those investors, who have remained invested all through this quick cycle, the best way out is to realign their portfolios as newer leaders emerged or would emerge.

One has to remember that there's no investment strategy that fits everyone or at every time, but to keep learning and aligning to the changing environments. So, even the winners of this cycle still have to be vigilant and aware of the new cycle. What every investor has to keep in mind are those things that are in their control.

None can dictate markets, policies, economies and all the larger macros, but what's in our control is to have a plan, which is in-line to our goals, timelines and risk appetite. Not getting carried away by the market attractions and sticking to disciplined investing, nevertheless, is easier said than done.

(The author is a co-founder of "Wealocity", a wealth management firm and could be reached at

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