Can smart Fund Managers create a permanent bull market in your portfolio?
We absolutely believe they can!
But first: Why is this question at all relevant?
Well, it is very logical for you to think that markets have gone up a lot and therefore, should you be investing right now or not?
Many big and small investors have thought exactly like this in the past several months!
Of course, we have seen that markets have kept going up despite all the doubts and scepticism.
As a result of this hesitation, many, many Investors have lost the chance of a lifetime to make massive profits because their Wealth Management Company or Portfolio Management Services Company, failed to guide them on how to create a Permanent Bull Market in their portfolios.
What is the solution, then?
Let's understand some key things first.
1. There is nothing called a bull market or a bear market
There is always a bull market and there is always a bear market coexisting at any point in time.
What this means is that certain categories of investments will be in a bear market while at exactly the same time, certain categories will be in a bull market!
For example, in the last 10 years:
Emerging markets were in a bear market while US markets were in a bull market. Despite, both being Equities!
Overall, Equities were in a bull market while commodities were in a bear market.
US dollar was in a bull market while Emerging currencies were in a bear market.
In 2020, Indian IT & Pharma stocks had a massive bull market, while simultaneously, Indian Banking had a massive bear market (Bank NIFTY was up just 1-2% for the Year 2020!)
The point that we are trying to make is that of simultaneous Bull Markets and Bear Markets.
They coexist. All the time.
It only takes deep understanding of markets, to understand this. And exploit it.
2. Smart, proactive Asset & Sector Allocation, coupled with tight, tactical Risk Management can indeed create a permanent bull market for your wealth.
Do ask: is your investment manager or wealth advisor capable of understanding, and then exploiting these simultaneous, bull markets and bear markets?
Or are they just a one-trick, Equity-bull-market pony?
Also, the question to ask is: how good is your investment manager at the business of managing risk while continuing to generate Returns.
Allow us to give you some examples of how we do things at First Global:
In India, in the month of February last year, we saw plenty of dangers looming up because of the virus.
As a result, we immediately took protective action through our Tactical Insurance for Portfolio Protection Strategy: TIPP Tech. And by buying Government treasuries.
Our TIPP Tech saved our clients from a lot of damage in India as well as in the Global Stock Market.
From that point onward, i.e., March-end, we remained fully invested, riding the entire Bull market.
However, from the month of October, we started to buy a matrix of put options, via TIPP, again which was hedging at different points in time, different elements of our portfolio.
Therefore, we kept capturing the upside that the markets gave us without running the risk of big losses.
On the Global side where there are far better Risk Management and investment options available, it is so easily possible to diversify beautifully, across the world, into several uncorrelated asset classes, and individual stock Positions, that one can escape big meltdowns: just the massive range of choices available: 13,000 stocks, 100s of Fixed Income and REITs, dozens of commodities (previous metals, industrial, strategic like Rare Earth), all, when combined together into a perfect portfolio symphony, can capture most of available upside, without endangering portfolio safety.
And one can hedge each security, as well as a basket, too!
Just imagine the flexibility on offer globally!
See how we did it in 2020:
We moved away from our large American Technology stocks positioning around August last year and we increased our positions in Emerging markets and commodities.
As a result, we have had a very decent run even from the time that the NASDAQ became wobbly, with a flat-lining of major stocks like Amazon, Netflix, Facebook, Microsoft (these stocks have done almost nothing since August 2020!)
This is because we have had commodities that have done very well, we have had Bitcoin which has done very well, and we have had Global REITS that have done very well.
Therefore, tactically, we left the ageing bull market in FAANG stocks and fully exploited the younger bull market building up in other asset classes.
Further, our portfolios have been extremely well-balanced, with our overlay of TIPP Tech.
Therefore we kept capturing most of the upside that was on offer across the world, without running the risk of suffering massive losses, should the market have fallen.
Hence, the way we do things at FG, whether in our India PMS or Global PMS and Global Fund, is completely different from the rest: we are extremely vigilant at all points in time and we keep adding layers of protection of risk management, on an on-going basis.
We always keep scanning the environment for durable shifts in trajectories of asset classes, sectors, countries.
Then, by tactically hedging our portfolios, through a combination of TIPP Tech and Tightened Stop losses, we almost ensure that even if there is a massive crash, we don't suffer massive losses as other PMS and Funds routinely do. (Some losses can and will happen, of course. We are concerned only about big losses)
This creates sustainable portfolio returns, even if it means foregoing some extra upside, once in a while.
Nobody minds that!
What should be your takeaway?
Simple: You just need to choose your Investment Manager or Wealth Advisor wisely and then leave the Tactical aspects like asset classes and sectoral allocation, the Risk Management, to that carefully chosen Investment Manager.
And then only you can enjoy the full benefits that the market offers.
The best Fund Management & PMS Services companies should be able to deliver this tactical Risk Management, that smoothens out your portfolio returns, by prevention of massive losses, thereby creating a near-permanent bull market in your portfolio.
If they can't ensure this, they don't deserve your wealth.
The key learning for you is that if your choice of investment manager is right, you have solved your entire problem completely with regard to the management of your money/ funds: if your investment manager has the capabilities to navigate good markets and bad markets, that's all the analysis & work you need to do.
For example, If this so-called liquidity-driven market collapses, is your Investment Manager or Wealth advisor already aware of this risk and have they done adequate, proactive Risk Management and sectoral diversification?
Investing Heaven is possible: one can participate in all the Bull markets that are happening in India and globally while not running the risk of massive capital loss: that is what this business of investment & portfolio management skill is.
So stop worrying about navigating markets. Stop worrying about whether markets are too high.
Because that's what our job, as Investment Managers, is.
And that's what we do the best in this business.
And to end, this is how one can create a Permanent Bull Market: Smart proactive allocation, and risk management.
That's what Smart Money Managers or Fund Managers do.
We look forward to building steady and safe wealth for you.
If you want any help at all in your wealth creation journey, in managing your Investments, just drop us a line via this link and we will be right by your side, super quick!
From Your Friends at First Global
Trusted Financial Advisors to some of the world's largest Funds, Institutions & Family Offices, for 30 years
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Bipinchandra Dugam @bipinchandra90
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Shishir Kapadia @shishirkapadia1
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