Lecture Notes: Predicting Market Crashes

Introduction

• Presenter: Akshat
• Purpose: Discuss the macro data related to potential market crashes, not a prediction.
• Audience: Investors who are either holding profits or have idle money.
• Personal Note: Akshat runs a community called Wisdom Hatch.

Key Questions to Address

1. Should I book some profits?
2. Where to invest idle money?

Common Concerns in the Community

• Fear of market crash, inspired by economists like Harry Dent and investors like Warren Buffett.
• Headlines about market downturns causing panic.

Market Analysis

De facto Analysis

• Definition: De facto means 'practically understand this point.'
• Bull Run: Markets have been giving a breakout of above 20% over long periods.
• Bear Run: Markets drop from their peak by more than 20%.

Chart Analysis

• Market has not had a 5-year period where investors always lose money.
• Long-term investing is generally profitable; avoiding active timing.

Historical Context

• U.S. Stock Market: Since 1950, it's been one of the best-performing assets.
• Correlation: Strong link between the U.S. stock market and India's stock market.

Warren Buffett Example

• Has a significant cash position for exploring opportunities, not because he believes the market will crash imminently.
• Importance of having 'Opportunity Money.'

Reinvestment Risk

• Options: FDs, Real Estate, Debt, Gold, Bitcoin.
  • FDs: Barely keep up with inflation.
  • Real Estate: High taxation, not easily tradable.
  • Debt: Yield curve inversion indicates it's less reliable.
  • Gold, BTC: Other options but come with their own risks.

Macro Analysis Skills and Importance

• Understanding: Requires in-depth study and understanding of economics and market principles.
• Education: Akshat runs courses for beginners and intermediate investors.

Diversification Strategy

• Diversification: Investing in multiple stocks to mitigate risk; some will perform, others won't.
• Equity Allocation: Significant equity in the portfolio is recommended.
• Cash Bucket: Maintain a cash buffer for market corrections.

Investment Strategies

1. Minor Corrections: Be prepared for small market dips, not major crashes.
2. SIP vs. Bulk Buying: Transitioning to bulk buying during market opportunities rather than systematic investment plans (SIP).
3. Avoid Panic: Do not react irrationally to short-term market changes.

Conclusion

• Action Plan: Maintain significant equity, keep opportunity cash, and be prepared for minor corrections instead of waiting for a large crash.
• Community Support: Akshat's platform offers continuous guidance on what actions to take during market fluctuations.

Final Thoughts

• The macro-analysis view is crucial to make informed investment decisions and not get swayed by market noise.