Adaptive Plan

Adaptive investment approach aims to deliver consistent returns by adapting to the ever-changing market conditions. In this strategy we adjust investments to reflect market conditions such as the volatility, the current condition of the market (Bull or Bear).

This strategy is complete opposite of Buy and Hold strategy. History clearly shows that buy and hold does not work in real life. Markets may stay down for several decades (see examples below).

Problems with Buy and Hold

There are five serious problems with this approach –

1. Severe mental stress plus setbacks to health: Ask any senior investor who has faced 1992 scam, 2000 dotcom bust, and 2008 financial crisis, how it feels to helplessly watch your stocks crash and your hard-earned money losing value drastically. Even if the markets recover after few years, you may not recover from health setbacks (diabetes, heart problems, depression, …).

2. You may lose a lot if you stay invested for long at wrong time: Most new investors believe that in past, the markets have always recovered after 1-2 years, so staying invested for 5 to 10 years will always create great wealth. The fabulous 100 years chart of US Dow Jones Index below (Source: Chris Kacher, managing director of MoKa Investors) shows that recessions and recovery can last for very long period. This great chart shows clearly that it is extremely risky to assume that recessions last just 1 or 2 years. It is necessary that we remain prepared for the worst by learning from the history.

Dow Jones

During the first 100 years of this chart, US markets spent 60 years (19+25+16) in recession and recovery only! Although this chart is for US, but the stock markets move together all over the world.

3. Even recovery from a recession may not increase your portfolio value much: Major recessions in past have caused great decline in stock values, as you can see below –

1890 to 1896 bear market           : Dow falls 63%

1906 to 1915 bear market           : Dow falls 48.5%

1919 to 1921 bear market           : Dow falls 46.6%

1929 to 1932 great depression   : Dow falls 89%

1966 to 1974 inflation                 : Dow falls 45%

2000 to 2003 dotcom bust          : Dow falls 38%

2007 to 2009 financial crisis       : Dow falls 54%

Source: Closing milestones of the Dow Jones Industrial Average – Wikipedia

A 50% or more decline in your wealth can be quite devastating, but the sad thing is that most retail investors do not believe it can happen. Even after recovery (which may take years) you may not become wealthy in the time frame you had planned.

4. Your portfolio may suffer more than the Index: It is an empirical fact that the stocks almost always fall more than the Index. During the 2007 recession, most mutual fund schemes were down by over 80 to 90%, while index was down by about 50%. Another grave problem is that during recessions it always happens that some companies are totally wiped out. If you own any such stock then your portfolio will suffer even more.

5. Long term index returns are not real: Those who say stay invested will give example of Sensex returns in long term. But these returns will be very low if Nifty or Sensex constituent stocks were not changed! Several of Nifty50’s old constituents have almost vanished or crashed like Satyam, R Power, Unitech, Suzlon, JP Associate, Reliance Capital etc. So, it is not true that if you buy and hold for long term you will always be profitable. It mainly depends on your stocks.

These points should make it clear that investing for long term may not be beneficial all the times. When all indicators are flashing a serious warning, we should actively reallocate our assets. If stocks are not expected to do well, maybe some other asset class will perform better. The problem with exiting from stocks is that most of the times people do not believe that a serious bear market can happen.

How Adaptive Plan Works

This plan seeks to recognize the current regime in the market and then capitalize on the knowledge. We would be investing in stocks of high-growth companies during a bull market and then flee to a combination of debt/cash/rentals/commodities in a bear market. The investor can expect positive returns while avoiding the loss of capital in major downturns. For every recommendation, we also suggest proportion to be allocated. For example if we recommend gold at a particular price, we would also mention what should be the proportion of gold investment in your total portfolio.

Strategy during bull markets: During a bull market, we recommend stocks based on a growth oriented strategy as explained here.

Strategy during bear markets: Assets like gold, silver, many other commodities do well during an inflationary regime. We recommend the best option considering the domestic as well as global macro-economic environment.

Plans for small and big investors

We offer two Adaptive Plans, the strategy is same in both, but the options available are more in Global plan. The India plan will recommend only those securities which are listed in India, whereas the Global plan will also recommend US listed stocks and ETFs.

A. Adaptive Plan India (Annual subscription Rs 12,000)

  • Equity: Stocks listed on NSE and BSE, plus Indian index ETFs
  • Debt: Indian mutual funds
  • Other asset classes: Indian ETFs of commodities and real estate. About 150 ETFs are listed in India.

B. Adaptive Plan Global (Annual subscription Rs 18,000)

  • Equity: All in India plan plus US listed stocks and index/sector ETFs
  • Debt: Indian mutual funds
  • Other asset classes: All in India plan plus US ETFs of commodities, real estate, other asset classes, factor ETFs, inverse ETFs, leveraged ETFs, and currency ETFs. There are over 3000 ETFs listed in US.

Why Us

We understand global macro-economic environment, our past long-term forecasts on markets, assets, and sectors have been 100% correct. See our major forecasts, posted publicly –

May, 2023AI, big tech to gainNASDAQ index is up 24% till 12 Apr, 2024
May, 2023Invest in copperCopper is up 28% till April 2024
Apr, 2023Bull market expectedSensex rose ~23% in next one year
Sep, 2021Global inflation to riseInflation in US rose from 5% to 9% in next 1 year
Sep, 2020Rally expectedSensex rose over 75% till 2022
Feb, 2020Recession expectedSensex fell over 30%
Apr, 2019BJP win and rallySensex rose 9%

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