Stock Exposure – Beware of 5 Irrational Investment Motives | Equity Exposure for fun? It’s like eating without hunger. Stale food (Bear Phase) instead of healthful meals is correct (Bull Phase). Experts may advise exiting other asset classes, but never equity exposure to zero. The main reason is that even if all investors exit gold, gold prices will not fall below the floor price. Experts expect gold prices to stay over $950 per ounce. If all investors quit buying property, prices will not drop below cost. Builders will not sell below cost and stop fresh supply as is occurring currently. It will keep prices down. To maintain floor or cost price, property, and gold supply can be controlled. See how equity works.
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Stocks might have a penny floor price or virtual zero-cost price. Book Value is the stock’s true value, as I mentioned in Stock Investing – When to Join and Leave the Market. Book Value is stock cost. The big question is whether the corporation can manage stock supply if it falls below Book Value. . . The downside is infinite. Supply is uncontrollable. Analysts always advise staying invested. If it decreases supply too much, panic selling may occur. Analysts sometimes give individual investors strange, nonsensical justifications. It raises my BP. Stock Investors should avoid illogical equity exposure reasons.
1. Sell Off Another Kind Of Asset
I find it appalling that one of the industry’s most regarded analysts uses the underperformance of gold and real estate to push for equity investment. My wonderful friend neglected to mention that equity has also given double-digit negative returns over the course of the previous year.
The return over the course of three years is appallingly low, hovering around 5%. Second, even though the equity market generally performs better than other markets, that is not a good enough reason for me to expand my exposure to Stock. When it comes to equity exposure, having NO Position is still considered a position, as I’ve mentioned in some of my earlier writings. You should not say goodbye to equity in a way that is irreversible. Always be sure to enter at the appropriate moment, and then leave at the appropriate time.
2. Optimal Division of Stock
There is no such thing as the perfect distribution of assets. The optimal distribution of assets can only be achieved under perfect business circumstances. I was wondering if you could tell me whether or not the conditions under which our stock market functions are considered to be perfect.
The answer to that question is a resounding no. In most cases, financial advisors would recommend that the appropriate proportion of equity investments be equal to 100 minus the investor’s age. For instance, if I am 40 years old, the appropriate percentage of my exposure to equities for my portfolio would be 60%. Although I agree with you, this is not the case all of the time or even the majority of the time.
The nature of equity exposure is characterized as being dynamic. In a scenario with optimal asset allocation, I believe that the amount of exposure to equities should be regarded as the maximum possible amount. As a result, if I am 40 years old, I will keep the proportion of my portfolio that is invested in stocks anywhere from 0% to 60% of its total value.
3. The disadvantage is Minimal
It a more of an example of an invalid justification for equity exposure. This statement continues to repeat itself to me from 8500 all the way down to 7300. As I have indicated in some of my prior blogs, no one can accurately predict when the market will reach its lowest point. If you are going to invest with the mindset that there is minimal potential for loss, then you are making the worst error possible. You need to get past your anxiety over being left out of things. Before you begin investing, you should hold off until the positive triggers take effect.
You should avoid being swayed in the market, as I mentioned in an article where I discussed the worst decisions I’ve made as a stock investor. You cannot say that the market has struck its bottom until the macroeconomic data become positive and until FIIs continue to pump money into it.
4. Retail and Direct Investment Firms are Increasing Their Purchases.
Every other day, when I wake up and read the newspaper in the morning, I am greeted with a headline stating that DIIs or Retail Investors are buying. Believe me when I say that the market will not benefit from an emotional uptick in prices. This point is completely devoid of any logic or bearing on the discussion at all. My basic inquiry is whether or not DIIs and retail investors are capable of supporting the market and taking it to the next level.
Since March 2015, this group of investors has been making constant purchases, despite the fact that the market has been falling steadily since then. Let’s not ignore the reality that foreign institutional investors (FIIs) are the ones that really drive the market. If you are making investments on the basis of these news reports, then taking an equity exposure is the most illogical decision you could possibly make.
5. Without exposure to the stock market, it is impossible to achieve long-term goals such as retirement planning.
Another unadulterated piece of deception. Long-term stock investment returns are barely double-digit. Even investments in safe and secure debt can result in returns in the double-digit percentage range. You can experience a loss of up to two or a maximum of one percent. Mental stability trumps stock market volatility. I like stocks, but long-term aims should reduce risk. The gains from the stock Exposure market are not nearly as amazing as predicted, which is the reason why.
One more thing that analysts are concerned about is that the returns should be higher than the inflation rate. When inflation was high, equity exposure conversations often included this. At this point, the topic is never brought up again, not even once every three months. Let me inquire, can you tell me whether or not the current investment in the stock market is outpacing inflation? The correct response is in the negative.
If you are an investor, it is important for you to recognize that inflation is a cyclical phenomenon. There will be two distinct phases for you to go through. I beat inflation if I can earn 9% on debt instruments while the average 10-year inflation rate is 6%. If so, I’ll be completely happy. The rationale for this is that there is no danger associated with receiving returns.
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