@LarryWink If you are calling yourself a rookie, not sure what I should call myself. But still, as you have asked me, I will share some of my thoughts on this.
A wise man in the market once said, “there are only two people who catch the market highs and lows. One is God and the other is a liar”. Therefore, we just follow the market.
There is a Gujarati saying in the market, “Bhav Bhagwan Che”. This translates as ‘Price is God’ which means you should go with the flow and not question why the market is giving a certain price to a stock. It signifies that the price of a share is a correct reflection or representation of the company. If we are humble then we have to accept that the market is much wiser and not question the valuation or the prices.
Whatever I have said is applicable to all segments of the market, not just the small or microcap space. When there is a rally in market, it will start from the large caps and move down. But the largest amount of money is to be made in the small cap / microcap space. When the market falls, smallcaps are going to be hit first and the most. So, what is it that we can do to protect ourselves? Watch the market movements, stay nimble and follow the system.
Have a look at the current composition of the pf. All the themes that are the flavours of the season are present. PSUs, Defence, Railways, EV/Power etc.
The stocks have been changing in our pf over the last one or two years. We have moved with the themes.
There is this stock, JAIBALAJI, that has been in our ranking at the top ever since it was added to the index. It is clear that the this scrip gained most, before it entered the index. After getting into our pf, I don’t think it has moved much. However, our system has said that it should be part of our pf and therefore, it is. We don’t look at stock wise, we look at the pf on the whole. If we believe our system is robust, we should be manage the market movements easily.
To summarise, we don’t know if this end or the continuation or the beginning of a bull run. We do not know which stocks will gain and which will lose. We do not know what themes will be favoured by the market in future.
Therefore, we just follow our system. Be agile and move in and out as indicated by the system.
I do not know if I have answered your question or concerns fully, but this is my belief. I will remain invested as long as my system tells me.
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