Weekend Reflections : 17th June 2017
I started investing in stocks in 1983, while still in college. The first Bull Run I experienced was in 1985 during Rajiv Gandhi's time, but I had not studied history of the markets and hence sold out early.
The second time I thought I was better prepared. In 1992 I was scared of my wits when the market started rising irrationally. However, having seen '85, I held on and saw my NAV spiraling upwards, When I could no longer believe that it was God's intention to make me Rich, I sold out and that day almost coincided with the peak. When the Harshad Scam broke out I thought God was really on my side and keeping some money aside for my first Car : A Maruti 800, I ploughed back the rest of the money a 1000 points below the peak. But I saw a slow downward grind of the market which fell another 1500 points over the next year, thereby completely wiping out all my gains.
In the 1999-00 Dotcom Bull run , I was more careful and I advised clients to put a trailing stop loss ( ie. protecting their profits in case market reverses) and was able to save a few of my client's profits, since most of them did not heed my advice.Same was the case in 2007-08 Bull Run. Again most of the clients called me a Perma Bear and refused to listen.
Now we are in the midst of another crazy bull run with all the analysts in the media goading investors to buy blindly. The valuations today are higher than we have ever seen for so many mid caps and micro caps. Stock Markets are irrational for more time than we can imagine.
In such times, while enjoying the Bull Run and the positive effect it has on one's portfolios, it would be prudent to keep trailing stop losses and protect one's profits. Hope some one else other than me learns from my past mistakes.