It’s another new All Time High 🚀

Discipline is the soul of an army.

It makes small numbers formidable,
Procures success to the weak,
And esteem to all.

: Washington


The global version of “Buffet Indicator” i.e (Global Stock Market Cap / Global GDP) hit an all time high (ATH) of 142% last week. Closer to home Nifty 50 and Sensex reached new ATHs as well. If you kept investing through the “fear” and then “greed” of last 2 years and continue to do so today then first congratulate yourself. You have taken a big leap towards long term thinking and investing.


However, new ATHs bring a new set of questions and doubts in the investing community. We tackle a few such FAQs today.




I have too many equity MFs / stocks in my portfolio. Should I consolidate now that all my investments are in the money? The naive answer is “yes, this is likely the best price you will receive for some of these equity investments so please consolidate.” While we have been strong proponents of consolidation and have written extensively on naive diversification, consolidating at market highs attract capital gain taxes.

And we do not like taxes.

We have been vocal about consolidation during market falls, but we are always hit back by “I don’t want to sell at a loss“. To which we say, so what, at least you won’t pay any taxes to consolidate. If you had consolidated in Mar – Apr of last year you would have paid none to marginal capital gains taxes. Now that all MFs and stocks have rallied the same consolidation can attract hefty capital gains taxes. So let this be a lesson learnt, it is more optimal to consolidate in a market correction.


Is “Kuvera Smart Beta Fund” a good New Fund Offering (NFO) to invest in? We are not an AMC and are not launching any fund yet, but it can not be denied that market highs bring with them a bunch of NFOs. In the fund management eco-system, NFO’s serve an interesting purpose. Market highs are when investors are feeling bullish, so it is easier for AMC to gather enough assets to make an NFO viable. NFOs also keep older and more mature funds in the same segment on their heels by increasing competition. Competition is good, but that cannot be reason enough to add an NFO to your portfolio. Further, if you add enough NFOs in your portfolio, soon you will be asking us the first question about consolidation. The bar to add an NFO should be the same as the bar to add another fund to your portfolio – the added fund should have low overlap with the existing portfolio and provide an ucorrelated risk-return benefit to the portfolio.


I am a bit confused between price and value? What should I focus on?

This is a tough one. So I will get some help from this tweetstorm from Niranjan Avasthi, who heads Products at Edelweiss AMC. Reproduced here with permission, thanks Niranjan.

“One Sunday morning in Phoenix mall at mumbai something unusual happened. Customers noticed shirts with price tag of Rs. 20k+, pair of trousers for Rs.15k+. A leather wallet for Rs. 13k and a jacket for mind-blowing Rs. 40k.

One curious customer went to a sales staff and found that she was showing a man Rs. 225/- 24 carat 7gm gold chain. When he looked inside the counter he saw a real diamond ring for Rs.95/-

Shocked at this he asked the sales staff “How could a gold chain sell for Rs.225, and a normal shirt sell for Rs. 20k. This is ridiculous”.

The sales staff said “last night a group of mischievous teenagers broke into the shop and changed the price tag on everything “.

She said since morning everyone is confused, people are acting like they have lost their sense of value. They are willing to pay lots of money for cheap things of little value, and almost nothing for things of great value.

It’s like they don’t know what is really valuable and what’s not. She said, I hope we get the price tags back right soon as I really feel sorry seeing people pay way too much for things of little value.

This incidence at Pheonix Mall may sound like a dream and would never happen in reality. But this happens everyday in our stock market. A group of mischievous people slid into market everyday and change the price tags.

They mark up the value of  things that are actually cheap and of low quality and put a huge discount on things that are really valuable. And sadly many people fall in trap, before someone corrects the price tags.

But it is often too late by then and many people lose a lot of wealth buying cheap things while they are ready to pay almost nothing for real valuable things.

It is important to figure out such mischievous activities in stock market and stay away from them. Spot things that are valuable but people are paying almost nothing. Just because someone changed its price tag doesn’t mean it isn’t valuable.

Ultimately someone will come and put the correct price tag. Keep eyes open and senses alive.”

And if it all sounds a little hard and too much work then stick to index fund.


The future looks bright, should I add more equity exposure? Stick to your asset allocation. When the market falls your asset allocation will require you to sell debt and buy equity. Similarly, when the market rallies your asset allocation will require you to sell equity and buy debt. Asset allocation is the counterweight to the prevailing trend. We advocate a percentage deviation based asset allocation rebalancing and right now it will more likely than not signal to sell some equities and buy some debt. There is a school of thought that your re-balancing can be regime based or levels based. If the market rallies x% do this and then if it rallies y% do that. Our advice is to keep your re-balancing simple – don’t build these complicated if-then structures for rebalancing. They rarely work outside of the backtest they are optimized on and are a pain to track and execute timely.

These are the top questions we are being asked at all-time highs. What’s on the top of your mind? Let us know.


Happy investing,
CEO | | @rustapharian

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Tax Harvesting is a technique that utilises the ₹1 Lakh annual LTCG exemption by selling and buying back part of your investment such that you “realise” gains and not pay taxes on them. At a 10% LTCG tax rate, you could save up to Rs 10,000 in LTCG taxes every year by doing this diligently.

Do not wait for February / March of FY21 to harvest taxes. Do it as early in the financial year as possible – as happened in FY20 you may not have gains later to harvest!

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