Comment on Mr Consistent returning incredible returns

Madan commented on 07 Jan 2014, 06:10 PM

Stock,

I see the question now. Markets are different and one shoe will not fit all the size. Having said that, your idea may not do well in UK/US stocks but they should do reasonably well even in those mkts if the underlying idea is based on something ‘solid’.

I might get 50% returns in India over a period of time but if i apply the same idea to S&P, it may earn only 20%. But, if your idea earns 100% in India and 5% in US, something might be off here(we are assuming that the kind of mkt – bull,bear, less volatile, more volatile, , flat/choppy, sideways but volatile, is similar between the two markets). There could be a situation where your idea is attuned to only India market in 2013 but not attuned to a one-way rising mkt like US in 2013. So, you cannot discontinue something if it doesn’t work in other markets..One should be prudent enough to understand various market conditions and should know their strategy in-out to understand how it would behave in various market conditions. This comes from experience and any amount of reading cannot replace this knowledge.

Just to give a broader example, lets assume someone employ the same strategy of buying whenever the stock gives a 1-2% correction (like what people did in US in 1995-1999) to the years 2000-2002 & 2007-2009, you know what would have happened. 1995-1999 was a period where anyone can enter stock market , buy some stock, keep it for 6 months – he would have made 10-20% return just like that…but all these people got burned in 2000-2002.

1. So essentially, one should be crystal clear on what their idea is,
2. See if it is based on something solid(just not MACD or some indicator) and
3. most importantly, how it would behave in various market conditions, then

He’s much ahead of the game and he can trade in any market.

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