Why japans benchmark 10-year bonds yield more than doubled in the space of three months quora
Answers
I appreciate the fact that the question asks for “most consistent”, because that is the right approach to have, since investing is not a hobby; It impacts on the overall quality of your life so it is important to invest in a manner where you are not forced to sell at a loss at a later stage of your life.
First thing an investor must do is to put enough money in debt assets to have sufficient ammo to average out their equity investments in the event of a correction.
From my observation, the ones who benefited from equity were those who :
..invested a lumpsum.
..had some money left to average out when a crash occurred.
Only those people were wiped out in the 2008 crash who didn’t have any surplus to deploy. All the other disciplined investors were able to take advantage of the discount sale and made above average returns. This takes a lot of patience and you need to wait years before there is a bigger correction (20–30%) to deploy a major chunk of your debt funds into equity. This lumpsum debt-to-equity asset reallocation will give you better returns than staying invested in equity via SIP “at all times”. Take big calls, stay out of the market until it starts selling at a massive discount. Then make a big entry and stay invested for a long time. Once you buy at a low point, your downside is comparatively protected.
There is no sense in continuing an SIP in a bull run in the name of rupee-cost-averaging. It’s just jargon that doesn’t work for you. It is only meant to work for the broker who makes a commission out of your paycheque.
I did some napkin-calculations and found that the SIP cuts down your CAGR by 50%, compared to a lumpsum in the same asset. That’s because as time progresses, your SIP would end up buying lesser and lesser shares at a higher and higher price. The bigger the bull run, the more your SIP underperforms. The lumpsum returns of equity from 2009 to 2019 are 15%. If you did the same via SIP, your returns would be 8% (less than PPF).
If you have lumpsum and the market is not presenting attractive valuations, then invest lumpsum in debt and wait till the equity market corrects so that it can be moved into equity as a lumpsum. Otherwise, if you try to convert the lumpsum into an SIP/STP to spread out the investment timeline, you are only shortchanging the edge you’d otherwise have over others who didn’t have the lumpsum. Timing the market will easily double or triple your returns compared to the index.
Secondly, never over-diversify your stocks.
The more companies you invest in, the less your upside will be. That’s because diversifying doesn’t just average out the risk, it also averages out the potential gains from your good bets. Having a concentrated portfolio will allow you to capture the growth of good companies. The nature of success is that only a few companies will “outperform” the collective growth rate of the companies. Your job is to be able to predict which companies might have that quality and concentrate your investment in those. If you diversify too much and some of your stocks become multibaggers, the rest of them would average out the gains and you’d wish you had invested more. Buying more companies does increase the statistical probability of catching a multibagger but it also results in diluting your portfolio to the point where your overall returns wont beat the market.
When managing your own stocks, buying at the most 15–20 companies with conviction would do the trick. Anything above 25, and you’d be better off parking your money in a mutual fund where the fund manager will have a portfolio of 60+ stocks. The goal of managing your own portfolio is to get the benefit of concentration with a view on future bonuses, dividends, splits as a reward for holding through the bad times. The MF manager is under pressure to show good Y-o-Y returns so he’s more likely to weed out even good companies if they fall in valuation on a yearly basis, so that he can chase the short term momentum in the bad stocks and keep the inflows coming. In the process, you lose out on potential multibaggers. Don’t manage your portfolio like a mutual fund manager.
Don’t chase multiple strategies. Most people who try to create a ‘jack of all trades’ portfolio will grab a few PSUs for dividends, a few high risk smallcaps (from Whatsapp “tips”) for potential gains and some well known largecaps for “stability”.
In the end, the PSU hardly gives a 4% CAGR over 10 years, the largecap gives 9%, and the smallcap collapses completely, giving negative return, so the overall portfolio return becomes 2%. In such a muddled portfolio, even if you accidentally catch a multibagger, the overall gains will be diluted to the point of giving FD-grade returns.
That’s it.
Recap :
Have a big debt portfolio.
Prefer lumpsum over SIP.
Don’t overdiversify.
hope its help you
plzz mark it brainliest
thank you
-Viswajeet