The laws of the financial world are different from the physical world. You can have prolonged periods of time, when sanity takes a back seat and excesses happen.
Retail trading or day trading has exploded because of falling brokerage rates, democratization of information, higher transparency and mobile platforms.
My simple message for dear readers is, if you don’t have any desperate need for funds, then don’t do anything.
The blow up of a US hedge fund has resulted in WhatsApp university offering many courses on what went wrong with Bill Hwang and Archegos.
The expensive valuations have been sustained by strong rebound in corporate earnings which led to ~8% upgrade in FY22 Nifty EPS since October 2020.
We believe the interest rates are likely to have bottomed due to inflationary pressure, large government borrowings and normalizing credit growth. Hence rate sensitive sectors should be avoided in our view.
As markets make new highs, one gets more emails and messages, which highlight the accomplishments of traders who have found a formula for making money.
Data does not seem to convincingly prove that short periods of high returns are always followed by meagre returns. Only in 4 instances, we had negative returns in the subsequent year.
Since September end, Bankex is up 16% with large banks like ICICI Bank, Bandhan up 20-27%, Housing Finance Companies like Repco, LICHF, PNB Housing are up 50%-100% from their six-month lows.
Morgan Housel’s 'The Psychology of Money' explains in detail the role of human biases in investment decisions.