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*At $95/oz Silver, the most dangerous thing you can have is an opinion without an exit plan.*
|**Asset / Index**|**Region**|**Recent Level**|**Status vs. ATH**|**% Drawdown**|
|:-|:-|:-|:-|:-|
|**Gold (Spot)**|Global|$4,806/oz|**At/Near ATH**|**\~0%**|
|**Silver (Spot)**|Global|$95.34/oz|**At/Near ATH**|**\~0%**|
|**S&P 500**|US|6,840|Off peak of \~7,000|**-2.3%**|
|**Nikkei 225**|Japan|38,900|Sharp drop this week|**-5.8%**|
|**Nifty 50**|India|25,100|Off peak of \~26,000|**-3.5%**|
|**Shanghai Comp**|China|4,113|Recovery trend|**-1.8%**\*|
Looking at the prices of anything today, one question becomes kind of difficult to answer, “where to put my money now?” One common thing that I come across these days is “**Should I buy Silver at 95$/oz?**” Its almost feeling like a million-dollar question, isn’t it? – The answer isn’t a “yes” or “no” its more about “What’s your exit plan?”
Well, one of the principles of Professional Wealth management is – Saving your losses is more important that chasing returns. This is what separates a professional from amateur. Like Warren Buffet famously said, “Rule 1 – Never lose money. Rule 2 – Never forget Rule 1”
**We all know at this point that if one loses 50% in his investments, he needs to basically double up the remaining capital to just recover!** With lots of things happening, besides major news flows around major regions like Us-Greenland row, Geopolitical tensions, Structural changes International Trade Treaties, Global Macro Vulnerabilities. We also seeing many developments in isolation, Critical Elements Supply Squeeze (Gold/Silver), Japan’s stimulus and tax cut policy heading with its own Rate Hike regime, Iron Ore Shock in Guinea, etc. One needs to be cognizant of not just broader pattern but also these developments in isolation as most big moves, and especially on downside risks are not just because of one big event, but also because of many isolation events playing around simultaneously.
It’s not being negative, it having a POV that most overlook in such times. Not at all this write up suggests that everything will crash, that would be a linear thinking. We all know that financial markets are not linear, so why would we have a linear approach looking things in binaries, the point is quite simple, besides looking at the white swans (events you know) and the black swans (events you cannot know), we should give a glance to grey swans (isolation events).
Many retail investors (sub-1 Crore) stumbled into diversification by accident—buying Gold or International Tech simply because their domestic stocks stalled. This is 'haphazard' diversification. To survive a 4Tn$ economy, you need a 'structural' approach. Just as an IT professional must upgrade their stack before the product becomes obsolete, an investor must upgrade from 'Buying & Sleeping' to 'Rebalancing & Stress-testing’.
**Here is the 'execution layer' for managing your risks in the current climate -**
1. **Don’t chase the surge, sell it:** many of you might have holding that has become multiples of their investments, most commonly seen in silver currently, instead of waiting for a 30% drawdown in a few days from peak, sell in small quantities and lower you base, so a big drawdown doesn’t affect you as much. Little chunks as are suitable to you. You aren’t exiting, you are locking in some gains.
2. **Tax Loss Harvesting, LTCG optimizer:** if you got laggards, and are losing conviction, or are unclear, tactically exit, and offset against gains elsewhere, release capital for your strategic rebalance. Saving 15-20% on taxes is a guaranteed return which doesn’t depend on the market conditions.
3. **Replace Lump Sum with STP:** Buying high value at high prices or averaging up during a parabolic surge market can be deadly when volatility strikes. Focus on Value allocation and use STPs to get the right side of the Rupee Cost Averaging (DCA) before the big moves comes in. Because, in a parabolic markets, risk is not about missing the 5% of the rally but about catching the 20% of the crash with the cash you have before recovery.
4. **War Chest:** Keep a war chest, always have some money parked elsewhere, better in places that gives inflation hedge, so you also have purchasing power, so you can use this when you see a big draw down to give a booster accumulation to your portfolio before the recovery phase.
5. **Transition from Net worth to Cash Flow:** Well, this is what happens when the markets turn into a bear. Most professional fund managers, typically move out of growth bets to reasonably valued, low beta high dividend yield or income bets. When markets are red, getting cash flow keeps one from panic selling.
6. **Have a safety net outside of your portfolio:** This is something that you all would have read about a lot. So not explaining much on this one.
This is not written to say bad times are ahead, but as a guide to how you can navigate times that may not be feeling “Bullish” because Bullish is not a market, it’s a sentiment.