June 24, 2024: Behavioral economics views risk reduction as a strategy to minimize regret rather than maximize risk-reward. Regret in a Bull Market is a two-way street. One regrets not booking timely profits; on the other hand, it’s a FOMO of not riding the profits enough. The answer lies in a “Portfolio-centric approach” adopted for a Bull Market run where Nifty makes All-Time highs every other day.
Summary:
- Adopt a Portfolio-Centric approach rather than Stock specific approach
- A common mistake for investors is trying to chase every call and end up with too much diversification
- Regularly trim Outperforming positions
- Weed out underperformers
- Better to regularly rebalance the portfolio in a bull run (and pay Capital gain taxes) rather than not wait for tax harvesting and hold on to underperformance
- Last but not the least, get convinced that this Bull Market is for real
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