Lumpsum investment in Smallcase and ended up in loss. Looking for advise

#1

Hi All,

I invested a lump sum amount during market highs in below small cases during Jan 2018.

  1. Magic Formula
  2. CANSLIM-esque
  3. Bargain buys

I did not invest in small cases after the lump sum investment but have been rebalancing the portfolio until now. I currently have a loss of 36%. I am nervous about investing in SIP, to even it out, fearing if I’d lose more.

I would like to get some suggestion on the how to proceed now. The goal is to recover from loss(36% to 10%) and get out of smallcase. Will be very glad if I can get back the full amount, but I can live with a 10% loss.

  1. Continue rebalancing hoping for a bull run for the stocks in my small cases and exit when losses are minimized to 10%.
  2. Exit now so that I can save the remaining 74%.

Based on your knowledge, what would you suggest? or is there any other strategy that might help achieve my goal.

Any inputs are greatly appreciated!

P.S. I learned my lesson that lumpsum investment is unwise. I understand that the performance of the small case in the future is VERY subjective to how the market performs. I am just looking for suggestions based on your knowledge/experience.

Thanks,
VM

1 Like
#2

It simple smallcase investment research is realted to long term i.e 5 to 7 year wait till you may get profit.

#3

I’m not too knowlegeable about smallcases but it generally doesn’t work out too well when people invest during market highs as prices tend to quickly take a swing to the negative. Investing when the market is near a zone of strong support and near the lows of an uptrend would increase chances of profitability quite considerably.:slightly_smiling_face:

#4

Keep good portion of your investment money in index funds - Nifty or Nifty Next 50 funds

Rest of the portion you can play on thematic funds

1 Like
#5

wrong lesson to learn.

Nothing wrong in lumpsump investment.

Coming to your loss problem.

Smallcase should not be losing in a bull run. we have seen the bulls come out in the past 2 months.

So who ever designed the small cases picked the wrong stocks.

Best thing would be to just buy the whole market(nifty/niftymidandsmall) and not a slice(smallcase) of it. That is your mistake.

Cut your losses now and put them in FDs/G-Secs/NIFTY Funds appropriately. you will recover.

1 Like
#6

Yeah, that makes sense to wait for a full market cycle. Just that I am leery of waiting that long if I’d lose more, given that small case is a “small” set of stocks which is high risk.

But in my current scenario, what would you do? Cut current losses and get out OR re-invest OR let it marinate until next bull run to exit?

#7

I actually have something like that. Ultra short term funds and FDs and stock mutual funds and some on smallcase. It is unnerving to see the deep loss % though which is why I wanted to get some suggestions.

So in my current scenario, what would you do? Cut current losses and get out OR re-invest OR let it marinate until next bull run to exit?

#8

Thanks for the reply. I was expecting something like this. Cut your losses gets +1!

Do you by any chance have a recommendation on any good index funds that I can invest through coin?

#9

I agree, investing in market highs was a bad move indeed. But in my current scenario, what would you do? Cut current losses and get out OR re-invest OR let it marinate until next bull run to exit?

#10

i cannot give any recommendation , since i do not know what your risk tolerance and your objective is.

Either way, now is not the best time to invest since nifty is at an all time high. I would wait for a decent pullback.

you now have time on your side to understand risk. Study risk first before investing.

Once you understand risk the right way , you wont need to worry which fund to buy.

1 Like
#11

If you have 20% or less of your entire investment into this particular one where you have deep loss, you shouldn’t be so much worried. You can explore/switch to other smallcases etc, but nothing major change required.

If you have substantial %age of your investment into such funds, reduce it to 20% or even 10% if you are very risk averse.

Mostly the percentage you will decide, I am just giving example.

#12

Nifty midcap index has risen only 2% YTD, while Nifty has risen 9%.

I am assuming such funds mostly put in midcaps, so its just market cycle.

If midcaps were zooming up more than index due to Modi wave, you would have been performing better than index funds.

That is why I said when you have a good chunk in index funds, and remaining in thematic/midcaps etc, you wont worry about the PNL here because you can see right now midcaps are underperforming Nifty.

#13

I dont think any recommendation needed for index funds, all should perform the same.

Mostly if you want to time it, better follow the market as a passive trader (other option being SIP of course).

What i mean passive trader is that, since 2018, multiple times every news channel, analyst was telling Nifty 10000 is good support. Market has bounced twice from there in 1 year.

So atleast follow such levels, and you can have some idea (if not 100% accuracy) as to when to put money in index funds rather than putting lumpsum at highs.

#14

That’s an interesting point! In fact, two of the small cases are small-cap and looking at NIFTY small-cap from the time I invested is down 30%. I am down 35%, so as you said it is just the market cycle that is down for small caps.

#15

Thank you for the insight! Yes, I guess your point aligns with @trader_dude to wait for a decent support level to re-invest given that we are at all-time highs now. Regarding the market news, I was following closely a while back but stopped after the bear run since there were lots of fluff and ignoring the useless material and digest the legit news was difficult, at least for me. But I hear ya, if not deep just following at a higher level would help here.

#16

Do not worry! Nothing will happen to your investment.
Just hold on the it. Think of it like you are in airplane and outside thunderstorms you believe in pilot. Before February most of the investors had minimum 25% on portfolio but on individual scrip it’s 46% and it’s tatamotors. So no worry. You will land good.just do not check your investments on daily basis if you are a long term investor.

#17

Don’t worry and dont even think of exiting it when your loss is reduced to 10%. It looks like you invested in them at the peak valuations . If you have quality stocks in your portfolio then it should bounce back. keep a long term view and reap the benefits.

We all hear that over the long term no other asset class can give the return that equity can give. Almost all of these studies are done based on the nifty or sensex index movement. So I believe it is always best to have a large allocation into index funds that track nifty or sensex. India is only going to grow and that growth will reflect in nifty and sensex movement. Mid cap and small cap will also grow but if Indian economy is growing the first reflection of it will be in the nifty and sensex. I hope you get my point.

1 Like
#18

@YV7459 - Thanks for the confidence. Looking at the stocks that are in heavy loss, they are indeed decent stocks. I don’t check daily but do it half-yearly or so. It has been more than a year since I did these investments. So I thought I’d get some suggestions.

@FIRE55 - I agree equity return will be the best for the long term. I wasn’t sure if the small cases(set of stocks) I invested is good for the long run, looking at the performance in the past year. I have invested in mutual funds which consistently beat the market in their respective sectors so I guess that should yield profit when the economy grows. But I see your point, investing on the indices would be a straight forward approach for profitable investment.

I did a basic check on the stocks that are in negative by looking at how their peers performed and also to see if there are any mutual funds that have invested in them(some fund manager has chosen this fund gives me some confidence). Seems like they aren’t so bad which gives me some level of confidence. Not a great way to asses the quality of stocks but something I could do in a couple of hours.