Investment Rotation: Your reason to always remain invested.

Typically, in any bull or bear market, most stocks ride the wave. However, certain sectors outperform the others, be it on the upside or the downside.

From the early 1900s right up to the tech bubble of 2000, this can be studied with the help of market data. However, since I have personally witnessed two phenomenal volatile events while investing and being invested, I am going to write about them with examples.

In 2008, during the subprime/Lehman crisis, the banking/financial sector was punished. No single bank was able to withstand the sell-off which also contributed to the overall downturn of global markets. However, at the same time, you had 'defensives', stocks that did not budge, the safe havens of that time. There are many examples, however some prominent ones are MCD (NYSE) and ITC (NSE).

Coming to 2020, this was (and is currently) even more prominent. Due to COVID-19, in March 2020, we saw a massive sell-off globally across sectors. However, there was a violent rebound primarily in (but not limited to) technology and healthcare/pharmaceuticals. NASDAQ is aggressively making higher highs with several names returning around 100% from their pre-covid highs within months, leave alone their covid lows. Some famous names being TSLA (NASDAQ), SHOP (NYSE). If I have to move to another market (India) and sector (healthcare/pharma), check out AARTIDRUGS (NSE), LAURUSLABS (NSE).

The Lehman crisis (2008) and COVID-19 (2020) are exaggerated events that give a gist of what investment rotation is and can be. However, this happens all the time! Moreover, rotation is not limited to sectors. This also happens between asset classes (equity/debt/commodity) or stocks of different market capitalization (small/mid/large cap stocks).

It is very easy to talk about events in hindsight. But this is to gear you with the understanding and prepare you for the next major rotation.

So what do you think will be the next rotation? Will it be when an official covid vaccine comes out? Will it be the banks that will again lead the post covid bull? Will technology continue sailing higher or top out and burst? Are you geared for it? Have you set aside some cash to pour into your picks?

I will leave you with this for now ;)

All the best and happy investing!

Ali Godrej Patel

Disclaimer: I currently hold Shopify (avg 288), Aarti Drugs (avg 995), Laurus Labs (avg 474) and have also recommended them to my members and clients in the past.