Cash Call–Its not about the Right Exits. Replies & Insightful Tweets.

I wrote on X this tweet.

Got some insightful replies from Fund Managers.

Read and Think over it.

Tweet Link  = https://x.com/nooreshtech/status/1883047933341503901 

#CashCall - It's not about the Right Exit !!

A & B start at 100.

A = 30 rs cash & 70 rs invested.
B = 0 cash & 100 rs invested.

Market Correction = -25%

A= 82.5 B = 75

Market up 33.33%. Back to 100

A= 110. B = 100.

But if A ends up keeping 15% cash.

A= 105
B = 100.

5% outperformance not a big difference.

Timing of Re-Deploying Cash is more important than Timing of CashCall.

Reality is the Future Outperformance will be decided by who owns the Next Cycle Outperformers A or B.

Why do many Investors not take Big Cash Calls?

1) They don't trust their Timing Skills in Re-Deploying Capital at the Right Time.
or
2) They trust themselves to be deployed in Stocks which can Outperform the Market Returns or their ability to shift portfolio to Outperforming Stocks with Changing Cycles.

What do you think & What Strategy do you Prefer?

The Replies

1) Prabhakar Kudwa   ( Do checkout a Stoic Talks episode I did alongwith Puneet )

One has to get too many decisions right to make it work which makes it not worth it.

When to go to cash - too many times it’s premature and markets go much higher post that before correcting

When to redeploy - markets bounce back in the face of bad news always so very hard to deploy when env is bad.

Also on a rebound, stocks which corrected most typically bounce back more than those with relative strength and most of the times cash gets deployed in stocks with relative strength leading to short term under performance on a rebound

Add to that tx cost , tax impact.

If you screw up any of the above steps, you end up worse off than if you had stayed fully invested.


2) Ravi Dharamshi   ( Do checkout a Stoic Talks episode with him )

Totally endorse. Don’t act cute. Don’t overestimate your ability to time it precisely (again and again).

3) Rohit Chauhan  ( Do checkout a Stoic Talks episode i did alongwith Puneet )

I would break it up in two parts

If I am indexing, I prefer to remain fully invested and just do SIP. No cash call. Indexing ensures diversification and reasonable returns . So option B

If I am investing actively, I used to do B, but what happens is that extreme losses in some stocks or across caused me to become very risk averse. In addition to financial capital, a lot of mental capital was lost

So now I prefer option A . It may be sub-optimal, but is easier on my psyche and allows me to get aggressive when the market turns

Again some people have better temperament and can do this better but I am chicken

Other interesting replies

Shailesh Naik

Simple Asset allocation of debt to equity works most of time

Keep 90% equity , 10% Debt . If market goes up recalibrate by selling equity to bring debt to 10%

If it fall reduce debt to bring 90% to equity .

For me- timing market top / bottom is very difficult


Other Insightful Tweets this Week


1) Market Breadth by @Nooreshtech


Market Breadth Data - Fall from 52wk Highs

Scan Date : 25-01-25

80% of the stocks are down >20% from their respective 52week highs (79% on 14th Jan) &

55% of the stocks are down >30% from their respective 52 week highs (53% on 14th Jan)

Source: Screener


Image


2) Qips underwater by Nirav Parikh

Almost 50% of QIPs are now trading below QIP price. (Data - CY2023 & CY24). Further deterioration might slowdown fund raising.

Image

4) Book Reco = Confessions of Stock Market Wizards – Safir Anand

Interesting names and priced cheap at sub 500. Link - https://amzn.to/4hviH9R 

Image

5) Quarterly Earnings – Good or Bad by Puneet Khurana

We all keep on hearing that earnings are bad this quarter.. but just to give a quick context... Of the 488 comp that have declared results so far, 442 of which have been there for atleast last 12 quarters, the current YOY growth of Quarterly Profits is 13.4% Good or bad ?

Read the full thread - https://x.com/PuneetK009/status/1883377454569701724

Ending with a Timpeass Tweet

Reading the #%#*#* content by #Fintwits the first instinct is to swear, comment,troll and what not. Dont !!!! Focus on the Good Ones ( there are many ) Follow this Rule "Bitch Privately, Appreciate Publicly !! " ( privately DM me the Bad stuff for timepass )

https://x.com/nooreshtech/status/1883465503110525436

Online Technical Analysis Course ( Recorded )  @ Rs 999/-

Please note: We have reduced the course pricing from ₹6000 to ₹999 as it was recorded in 2020. However, rest assured, the content remains highly relevant and valuable. 14-15 hours of Recorded Videos.

https://bvuod.courses.store/149782 Can watch on Nooreshtech Android App or on Laptop – web.classplusapp.com  ( org zode = bvuod )


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