Ask any fund manager personally and they will tell you “we are like trustees and we do not like people to lose money” – they love telling me that. They think like a honest postman I will believe that they mean it. Sadly my training as a CA has taught me to be suspicious. Sala sub ko suspect karo.

So when a FM says ‘market is high’ I ask them ‘have you stopped accepting money’. Most cases the answer is no. Then the favorite is “Mid caps have run up, but large caps are still not bad”. So FM should I redeem my your mid cap fund? Of course. Lekin, kintu, parantu I will invest in a competitor’s large cap fund. No Subra..it is not that bad and …blah blah. I have not redeemed a single mid cap based on current performance.

Frankly it is very difficult for me to judge people by what they do. I have no investigative team to find out what they do, where they invest, what is their alpha, etc. so largely ignore what I have to say if it does not suit you.

I was just hit by the Equal weighted Nifty fund (face it, that is also a theme) when I saw the ‘Bharat ETF 22′. Another thematic fund with PSu as the theme. OMG I will not invest. However that is my personal bias. You have to decide what you should do with your money.

There is a wassup message going around saying “market is at a pe of 26 – first it was 26 in the year 2000, then in 2008 and now”. I have no clue what they are saying, but maybe they are implying that it is a good time to sell. I partially agree.

In 2008 I sold Tata Power, Cholamandalam, LnT, Kotak bank, Siemens – face it the 2003-7 was an infra boom and these shares were all quoting at ridiculously high PE and was (in retrospect) unsustainable. So lucky me I sold. No. I did not know that the market will fall. I did not sell pharma, fmcg, engineering,…etc. and I have no regrets.

Most fund managers now cannot see where the overvaluation is. Know why? because it is in their own house. Look at the increase in the market cap of banking and financial services companies. Look who is selling!!

Chanda Kochhar, Arundhati Bhattacharya, Kumaramangalam Birla, Deepak Parekh, Ambani,  – lets face it – the sharpest of the sharpest. Even assuming that they do not know market timing, they have all the power and money to buy the best advice. They are selling. Icici Pru Life, Icici Lombard, Reliance Mutual fund, SBI life insurance, Hdfc life insurance….wow wow…and who is buying? People like you and me who are doing sip of Rs. 3000 per month for 5 years or 25 years or perenially!! Best of luck to us!

So when somebody tells you that the market is high, tell them thanks. Then look at your portfolio. If it has those shares which are really at a pe of 50, 70, 90….you know these are high. Re look at your asset allocation. If you are 30% in equity and balance in debt, remember that selling equity will hurt you as bad as not buying equity!! Sell off shares that are high priced. I am not saying you should sell all your bfsi shares. The tragedy is that the fund managers cannot see overvaluation in their own friends’ companies. Also they are being paid a salary to ‘not see’ valuation in the shit that is on sale. So can you imagine Icici direct RM calling you and saying ‘Sir icici lombard is over priced’. Oops. He is a wealth manager who has to create wealth for his shareholders 🙂