Have you seen a test match in cricket from the ball one till the end? Or do you have seen a T20 match from the ball one till the end? For most of you the answer would be the latter one, right?
Why is that so? Because test matches are boring, no one watches them. The batsman is leaving every second ball. Why should I watch it and waste my time, you might be saying.
In contrast, T20 cricket is exciting! Every new ball is a thriller. Anything can happen inside and over. You can see each player animated on the ground. So much fun, right?
While test cricket enthusiasts might disagree with me, indeed, people donʼt have time to watch every ball of the test match.
Similarly, Gautam Gambhir was once asked, which player is good for the team – the one who scores very fast from the early on, Or the one who scores steady runs on the pitch and stays on.
He replied that the first one gets the news headlines, but the winning runs are scored by the player who stayed long on the crease and made runs.
Do you notice any similarities in both the cases? The essence of these scenarios is similar to the present context.
In the mutual fund industry, small caps and midcaps are getting headlines due to strong rallies similar to the T20s and the players who get headlines with a recent performance in a match or two.
People are rushing to buy the small-caps and mid-caps so, fund managers have to buy the stocks which are trading at absurd valuations.
Indiaʼs economic structure is changing fast, with manufacturing, exports, infrastructure, defense, travel and tourism, renewables, and new-age tech platforms being increasingly represented in the mid and small-cap space. Naturally, there is a mad rush to buy these stocks.
Retail investors are mesmerized by very high returns and start chasing them.
This is the typical herd mentality that we often see with smallcaps and midcaps.
The fear of missing out on the potential high returns, rapid growth, and maximizing short-term gains lures investors to jump into the fray leading to high valuations and steep corrections.
We have recently seen a part of the correction which could turn into a big picture in the future.
The Nifty Smallcap 100 index plunged 5.3 percent, while the Nifty Midcap 100 dropped 4.4 percent in what was their biggest single-day fall in nearly two years in the middle of March.
So, how do you navigate this small-cap and mid-cap ride with safety?
The answer could be a well-thought-out investment strategy, research before investing, and patience to invest for the long term.
What is the right investment strategy?
The clear answer is there is no one-size-fits-all. There can be a growthoriented strategy, value-investing strategy, or income-focused strategy.
By identifying your goals, preferences, and risk-taking ability, you can tailor your strategy.
What defines long-term investing?
Here is interesting data that shows that investors have never lost their money in equity if they invest for more than 7 years according to research done by ET Money.
So far, we have understood why it is important to invest long-term with planning and research, not just blindly jump on a bandwagon following other investors.
But with such a busy lifestyle, it is not possible to dedicate time to planning, investing, and analyzing unless you are a full-time investor.
What if someone who is an expert in doing all these functions and does it day and night?
Life would be so easy, right?
And the good news is that we have got these experts here at Mutual Fund Distributor.
We help you manage your finances better. Not only we are the Best SIP provider, but also offer Equity Investment, and P2P service.
So, you can get comprehensive investment solutions under one roof.
