How many times we have lost our heads in deciding the right stocks or cursed those who advise us to hold on to stocks even when the market goes for a toss? This constant tussle between what to choose and what to do hold on to often leaves one in a schizophrenic frame of mind. The meticulous manner in which we choose stocks based on their valuation and past earnings can be a painstaking affair. Vetri Subramaniam, Head Equity, UTI AMC, in a recent conversation with Value Research analysts, reveals how one should be more focused on securing financial goals than maximizing returns.
Allocate your capital wisely
The market is not your strongest ally; it can be an antithesis to your understanding of stock movement. Sudden external factors can put you in a tight spot. Subramaniam shares how he had an opportunity to learn from the early phase of his investing career as the market slid down by 23 per cent from June 1994 to April 2003. The tumultuous market conditions taught him early the importance of capital allocation. Besides, the veteran investor gained a valuable lesson that companies with an effective capital allocation strategy and earning healthy returns have higher chances of survival and creating wealth in the long run.
Not many people know how they must interpret economic movements nor have good stock-picking abilities. Subramaniam shares how he learned to ascertain the difference between the top-down perspective of the economy versus the bottom-up stock-picking strategy. This approach can help many investors to remain invested in their choice of companies irrespective of which direction the economy is moving. The insane ability to traverse between the economy and the stock market leads to good outcomes.
Sudden corrections in the market as in February-March 2022 and back in 2000-01 left many portfolios bleeding. Many investors saw their personal portfolios in red for a long period, some of them having suffered drawdowns as much as 80 per cent. Whether you withdraw from the market in a jiffy or continue to have faith in the stocks you had bought has a deciding effect on your investing strategy. Research well before investing in stocks. The time and resources you have spent in analysing your stocks give you the necessary conviction. Conviction gives patience. Patience gives returns. The gut strength to hold on to taught Subramaniam how to give precedence to securing his financial goals than maximizing returns over a period.
Investors take the help of multiple parameters while evaluating a stock for its price and its consistency. Subramaniam maintains that there is no better guide than valuations while making asset-allocation decisions.