The 80:20 Rule

Remember Investing is not a competition of trying to find the bottom or the top either…

The rational should be ‘you can have the top 20 % and the bottom 20 % , and I will take the rest of the 80 % in the middle’

This is the basis of the 80/20 investment philosophy and the driver behind the risk management process as quoted by Legendary Baron Nathan Rothschild.

While you may not beat the market from one year to the next,  you will never have to suffer the “time loss” required to “get back to even.” In the long run, you will win.

Yes you may sell early and miss the 10 % before the peak or you sell a little late and lose the 10 % from the peak. Likewise you may start by buying the market 10 % before or after its bottom . The goal is to capture the bulk of advance and miss the majority of the decline .

Buy signals may come early , right on time or late , likewise sell signals may come early or late ….
But the goal is to capture 80 % of the advance and participate only in no more than 20 % of the decline .

So I repeat again Investing is not a competition , but it’s a game of long term survival.

How To Add Exposure

Here are some guidelines to follow:

Move slowly. There is no rush in adding equity exposure to your portfolio. Use pullbacks to previous support levels to make adjustments.

If you are heavily UNDER-weight equities, DO NOT try and fully adjust your portfolio to your target allocation in one move.This could be disastrous if the market reverses sharply in the short term. Again, move slowly.

Begin by selling laggards and losers. These positions are dragging on performance as the market rises and tend to lead when markets fall.

Add to sectors, or positions, that are performing with, or outperforming, the broader market.

While the technical trends are intact, risk considerably outweighs the reward now... If you are not comfortable with potentially having to sell at a LOSS what you just bought, then wait for a larger correction to add exposure more safely. There is no harm in waiting for the “fat pitch” as the current market setup is not one.

If  none of this makes any sense to you – please consider hiring someone to manage your portfolio for you. It will be worth the additional expense over the long term or consider investing in mutual funds and ETF vide SIP.

Disclaimer : All the information shared is already available in the public domain and has only been compiled as per the topic of discussion.

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