What a party we are having in the debt-market, aren’t we?
Exceptional payouts, day after day, week after week, month after month, it’s almost going to be year after year.
Are you getting too comfortable? Lazy, perhaps?
Meaning to say, that when you can get a 10 % return after tax without having to move your behind for it, it is a very welcome scenario, right?
People, scenarios change.
It isn’t always going to be like it is at the moment.
Are you flexible enough to change with the scenario?
Or will you be lost in the current moment, so lost, that you will not recognize the signs of change?
What would be these signs? (Man, this is like spoon-feeding….grrrrrr&#*!).
Inflation begins to fall.
The country’s central bank announces back to back interest rate cuts.
Too lazy to read the paper? Or watch the news? Ok, if nothing else, your online liquid mutual fund statement should tip you off.
The payout, dammit, it will have decreased.
Also, something else starts performing.
Smart investors don’t like the debt payout anymore. They start moving their smart money into value equity picks.
Slowly, media stops reporting about a gloomy economy. The buzz gets around. Reforms are on the way.
Foreign direct investment picks up. The media latches on to it. It starts speaking about inflows as if the world begins and ends with inflows.
Now, the cauldron is hot and is getting hotter.
Debt payouts are getting lesser and lesser. Equity is already trending upwards, and has entered the meat of the move.
If the trend contnues, a medium to long-term bull market can result.
There you have it, the chronology played out till just before the start of a bull market of sorts.
Be alert. Recognize the signs early. Be mentally in a position to move out of the debt market, if the prevailing scenario changes.
… you miss a first run in equity. Boo-hoo. When stocks cool at a peak, and start falling, you make multiple wrong entries into them.
You get hammered by equity, having caught it on the down-swing.
You missed the correct entry time-point in equity because the debt-market made you too comfortable. You were late to act. When you acted, finally, you caught a correction, and took a hammering.
One or two more hammerings like that, and you’ll be off equity for the rest of your life.
And that, my dear friend, would be a pity.
Because, in mankind’s history, it is stocks that have given the best long-term returns. Not gold, not debt, not bonds, but stocks.
You need to approach them properly, and timing is key.