December 04, 2023 (MLN): By rising to a new zenith at the end of the trading session, PSX-100 is inscribing a history with the passing of every day. The market has crossed 60,000 levels and is being predicted to be at an unprecedented peak sooner than expected by market pundits in unison.
The mismatch between the benchmark Index and market p/e, the significant delta between the price of shares when the Index used to be at =54,000= as against when the Index is at =60,000=, and the resurgence of the economy from the state of uncertainty, all appear as a premonition of what is being proclaimed by the market pundits
A rising stock market is a good omen for individuals and institutional investors, as it is synonymous with higher investment returns. That is why the proverb “Higher the risk, higher the Return” has always been a motivational factor for investors to assume higher risk even in a highly accelerated progressing stock market.
But things stand differently for small investors when the stock market rises without any respite. Every bit of rise in the Index makes investing more challenging for them. Not only does their investing capacity dwindle, but their risk appetite also touches a new ebb.
Staying away in a rising market is the most obvious option to exercise but it is tagged with a price too. It costs to let the return forgo in a rising market without having an investing alternative to pursue.
The sayings of legendary investors such as George Soro and Larry Hite could be guiding principles for small investors in such a situation. To George Soros, “Survive first and make money afterward” is what assures long-term survival in the market, whereas to Larry Hite, “If you didn’t bet, you can’t win” If you lose all your chips, you can’t bet.”
Both refer to the same forewarning, i.e., “Preserve the Funds” but with a different style. The latter is more engaging and directional in approach. Larry Hite is a advocate of assuming higher investment risk for higher return in a rising stock market but with a care of protecting funds from absolute erosion.
It may be modeled for practice by Shifting investment preference from highly valued to medium and finally to small-cap stocks as the market progressively marches northwardly without compromising to risk of losing capital.
Small investors with limited funds may module the concept for practice, first by picking up low-valued stock with promising KPIs and second by leveraging quantity with using the funds as a fulcrum.
Investment in low-valued stocks with a promising future helps protect funds by averaging position at declined prices, whereas leveraging of quantity increases the chance of profit in a rising market by making investment sensitive to stock price.
The Strategy may deliver the best when it is integrated with Technical Analysis for Entry and Exit into/from the stock.
Try the Strategy as the second-best Option when Stock Market Exhausts you
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Posted on: 2023-12-04T11:31:02+05:00
