Quote:
|
Originally Posted by Gameboy
There might be a 30% cash cap in a bullmarket. This makes sense imo otherwise you are basically prejudging where the bull run might end and not only run the real risk of underperforming due to a large cash holding, but also missing a large part of the uptrend.
|
I don't know how NavraInvest managed their cash levels - part of the "secret formula" I'd suggest. However, you are correct in that high levels of cash to work against the fund in a strongly rising market - the same way that they benefit the fund in a strongly falling market. It's both a risk management tool, and an opportunity tool.
I remember when I was in the Navra offices a month or so back and Steve showed me a spreadsheet with the to-date performance figures ... on the sheet they identified how much cash was currently being held, and even how much that cash holding helped/hindered the fund (they did this for all the shares being held too). At the time, with the market going so well, the cash was actually seen as a hinderence - it had a (slight) negative overall impact on the performance of the fund.
They seem to have the forumla about right though - the market has basically gone straight up since then, and the NavraInvest funds are still outperforming the ASX200 ... so it doesn't seem to be that big a deal. The really big benefits come with the inevitable corrections - high cash holdings mean many more buying opportunities, which amplify future profit potentials.
__________________
Sim'
This is a general comment only and does not constitute advice. Before making financial decisions you should seek advice from a professional adviser, who can take into account your specific circumstances and investment goals.
|
