March 29, 2004. Virender Sehwag was batting on 295 not out.
🏏 Since we started playing cricket as a nation, no Indian had scored a triple century in a Test match till that day.
🏏 On the other side of the pitch, he had Sachin Tendulkar, the best batsman that the world has ever seen and he had specific instructions to not take big shots.
🏏 At the bowling end was Saqlin Mushtaq, one of the greatest spinners of all times.
🏏 112.61 crore Indians were waiting to see what Sehwag would do next.
What would you do if you were the one with the bat? Not that tough a guess – take as many balls you need, take four singles, and go down the pages of history smoothly.
Guess what the Sultan of Multan did? Hit the ball out of the ground for a six!
When asked the obvious question ‘Why?’, he said something which can make you ponder on how simple life can be. He said, he looks at deliveries in two ways – good balls and bad balls. It was a bad ball. And it deserved a six.
Investment in equity works similarly. One should get aggressive when valuations are down and defensive when they go up.
But like always, the actual realm is not exactly that simple. The way to judge valuations differ, the reasons determining the earning and its reflection, i.e. price differ, the macro and micro environmental stimuli leading to future projection differ.
We, human beings, as a species, are adaptive. Thus, to handle this situation, we deviced a wonderful method: Systemetic Transfer Plan, STP. It allows you to park your money at a non-volatile source scheme, a liquid fund (Fund A) and transfer it drop by drop on different calendar days, with different valuation points to the ultimate ocean of equity (Fund B). Thus, your cost of taking entries to equity averages out. In other words, it makes sure you don’t try and hit a six on a good and dangerous delivery.
But, we, human beings, as a species are progressing every day too! So we asked a question: Can we try and take it to the next level? Can we put a mechanism in place that will think like Sehwag – identify the good balls and the bad balls and control the STP better?
See, we are the most logical species for a reason. A few STP models do allow an investor to take better -informed, better-suited entries into equities and add an alpha to the portfolio by putting the first differential at the gate itself!
DSP BlackRock Flexi STP & Value STP are two of such platforms.
Flex STP steps up the investment amount and helps an investor to make the best use of a falling market (read: bad balls). An investor eventually buys more units when the market falls and doesn’t repeat the same when the market rises. And the best part is, it does it on its own so that the behavioural biases can’t come as roadblocks.
Similarly, Value STP helps an investor decide the target value of investment and automatically adjusts the STP based on market movements.
And thus, when you have a clear strategy in place, fitting the fundamental principle of investment: buy low, sell high (or don’t sell), you know your portfolio is doing good.
chakstalks 