II -The DEEP POCKETS love the fall…..

The market experts claim that we are in Bull market correction when the indices are falling fast enough to erode the bottom supports and again advocate that we are in bear phase, the rallies that took place are short lived and the rise is due to short coverings.

The fundamentals of the economy and more of the company are the two important factors/elements on which the managers build their portfolios. The retail investor mostly goes by tips, known person suggestions. The retail investor with “meager savings invested” gets confused where to exit and where to enter. The real problem with the retail investors is that the investments made in stock market are not in the nature of systematic investment but in one go due to limited availability of the source. In case if it happens in the bull run then the capital appreciation rate of growth lures a lot, forces for a leveraged positions that normally happens at the peak of the Bull run. We all as market participants know what happens to a leveraged position running with hope against the market trend.

The retail investor by chance gets the opportunity to exit at the peak and could wait for some time but the bounce back rallies at the first leg it self attract the total spared money for reinvestment and make hopeless in distress as the fall will be steep and looks for a solace by self-deception, relies on the news that the markets are in bull phase and the correction is only for the good.

These un-written guaranteed assurances keeps in position, makes a long waiting and that waiting goes in to the bear phase recommendation. The so called smart retail investors most of times go for a falling averages, just to reduce the cost with volume accelerate the B.P. and goes with empty hands.

If we consider the business cycles are existing since time immemorial and they consolidate there after for some time before a fresh lease of life is infused to reach the next step, like that it is also common to the stock markets. The markets get their peak and fall to a level from where it will difficult to fall further could be considered as bottom.

The managers are left with enough money to re-invest incase they go wrong at the price front. Those poor investors who wait all along the gloomy period again get trapped in these kind of suggestions that the up move rallies are short lived and they are, then the retail investor gets out of position with a (false) confidence, walks out of the street with a great feeling, a relief from the burden some pain carried all along the way. The retail investor takes this painful decision and goes bust by booking the loss with one or the other pretext where as the HNIs, deep pockets keep their nets wide open for a big catch.

The stock markets are such places that though no body has grudge or vengeance on the other person but during the process of making money by win over the other person(s), use of all available techniques on the earth. The rule is so simple like the underworld- If you do not kill, you will be killed.

The theories and the happenings on the face of it ratify those recommendations of the experts. There is no doubt that the time-line for any Bull or the Bear phase cannot be drawn by any person. So the experts get the advantage and can easily say that how can any body come to a conclusion at the very beginning?.

The retail investors need to ask a simple question when the proven legends of our history like Warren Buffett made millions by following long-term value investing, why we are caught up in loosing money?. The answer could be one among many- “Never invest on tips, the money you cannot wait till the targeted price is achieved”.

The fact is that- All the short lived rallies that took place in the “pessimistic view” about the markets are the foundations to the up coming Bull phase rallies.

Never Forget: I may be wrong, You may be wrong but markets always RIGHT.