When a Strategy Rises Fast
There was a time when a certain innovation-focused ETF in the US saw a huge rise. The fund focused on companies that were based on new technologies and had the potential to disrupt industries. From 2015 to 2021, especially after the COVID-19 crash, these kinds of stocks started rising sharply. The ETF jumped nearly 700% in this period, while Nasdaq itself rose about 232%. Many investors were drawn in because of this performance and the strong story built around the fund.
The Fall After the Peak
But after peaking in 2021, things started to change. The ETF began to fall and at one point, it was down almost 80% from its high. Even today, it is still down nearly 42% from that top.
This means many investors who entered at higher levels have seen major losses. The broader Nasdaq, meanwhile, continued to rise and has gone up 367% over 10 years. In comparison, the ETF has only gained 157% in the same period. This shows how important it is to not just focus on fast returns but also to plan for exits.
The Importance of an Exit Plan
When a stock or ETF rises sharply, it is natural to feel excited and hopeful. But it is very important to have a clear exit strategy. If investors had exited when the ETF was up 5 to 7 times, they could have protected their profits. Even during the initial fall, moving to another fund or to cash could have helped. Without an exit plan, all the gains can be lost. Watching something go from ₹800 to ₹250 is emotionally painful, and it can damage an investor’s confidence deeply.
Buy and Hold Can Be Risky
Many times people say “buy and hold” is the best way to invest. But if a strategy stops working for a long time, just holding it can be risky. If something gives no returns for 5 or 7 years, or even goes down, it might be time to rethink. Having multiple strategies in a portfolio is a smarter approach. If one is not working, others can support the overall performance. This helps keep the portfolio more balanced.
Market Price Speaks the Truth
It is also important to not get carried away by stories. A stock will not go to $2000 just because someone says so. If the market is pricing it at $200, that is what matters right now. Instead of believing in bold predictions, it is better to follow the trend, look at price movement, and know when to exit. A clear, self-correcting strategy is the best protection for your capital in any market.
On The Momentum Podcast this week
In Episode 2 of The Momentum Podcast, Rajnish, a seasoned investor from Pune, shares his shift from traditional investing to momentum strategies. He talks about avoiding costly mistakes, the real estate vs equity debate, and his approach to gold investing. A must-listen for young investors! Now streaming.
