Often these days I am asked by a lot of people as to why are portfolio returns not happening, why is our portfolio not moving up, why is it that we are being so conservative, why are we not investing and so on and so forth.

The other day I was in a friendly debate with Vikram Mehra (name changed) and his family and we were talking about why we have barely invested about 30-40 percent in stock market in the current situation and why we have not invested the balance money and when are we intending to actually invest it. This actually happens many a times every few years.

So I explained that we have little bit of process or a system by which we control how much money goes into stock market at a point in time and how much remains outside stock market so that money which is outside stock market earns a mediocre and safe rate of return versus the money which is in stock market is obviously subject to volatility which may be able to bring in higher returns in some months, perhaps no returns in other months and perhaps make a little bit of loss as well in some months. So we are just trying to balance both the balls in the air so that in some sense portfolio is taking care of itself, it is insulated and is protected against adversities or any other damage. That brought a smile on Vikram’s face. However, I could see it was not from his heart.

So I continued, that I am going to be a little technical now … I said, “Now you see there is an indicator, a ratio which tells us that whether the stock market is expensive or cheap. This indicator has been it has been in the high zone for very long time”. I added… “From a practical standpoint the market have been expensive for a long time. The knowledge of last 30 years says do not be too greedy and history will repeat itself, however, it seems for the moment history is at frustrating us. It is not repeating itself. Something is not correct. We do not know what is going to come and rock over world at what point of time.” He nodded in agreement this time! I was glad.

Now I will tell you why there is a problem. A lot of people do not know this and therefore fail with the stock markets. When market is moving upwards everyone is interested as there is easy & quick money, no bad news so people keep pumping in & that is normally the end of that phase. Then people lose money. People like us have seen this too many time and sometimes know too much. We share this with you and with your consent protect your money. He smiled. Truly from the bottom of his heart this time.

In conclusion I said, sometimes markets do not respond scientifically, because somebody is trying to sell (thinking markets may be expensive) and somebody but on the other side feel no news is a good news and therefore keep investing so things get netted off. Then there is SIP money that keeps coming in and same time hot money (short term trader’s money) is moving out so again a netting off effect. I am not by anyway saying SIP is a bad idea. It is a fantastic idea and I keep saying that SIP is a 8-15 year or more type of investment. So keep going with it. Never stop it. Just explaining how things get netted off. For lumpsum money we use the same principle and use the STP facility.

So as readers you can see how markets tend to move, sometimes they are expensive and we should avoid being aggressive and sometimes there will come a time you should put in every little penny you have in the stock market. It is a sweet problem to have sometimes and a rather frustrating one at other times. Never go over the top, never go away completely and in general invest and cherish.

Kartik Jhaveri is an expert at planning money, life and aspirations. He is a certified financial planner, wealth manager and financial freedom coach.

First Published:Jul 19, 2018 11:17 AM IST