The Performance Gap Between CNX 500 and Real Estate
This chart compares the CNX 500, represented by the white line, and the CNX Real Estate Index, shown as the golden line. Over an 11-year period from 2000 to 2020, the CNX 500 outperformed significantly, delivering a 335% return, while the Real Estate Index remained flat at zero. During such long stretches of underperformance, it’s natural to dismiss a sector as irrelevant or unworthy of investment.
The Turning Point for Real Estate
However, this narrative changed dramatically post-2020. From 2020 onward, the Real Estate Index surged by 450%, whereas the CNX 500 grew by only 200%. This demonstrates how even sectors that appear dormant for years can experience sharp reversals when market conditions shift. It’s a reminder that no sector or stock should be written off permanently.
Avoid Negative Bias Toward Stocks or Sectors
When a stock or sector underperforms, there’s often a temptation to develop a negative bias. For instance, if you’ve experienced losses in a particular stock, you might decide never to touch it again. But this approach could make you miss out on future opportunities. The same stock or sector that caused losses multiple times could turn into a multibagger on the fifth attempt.
Adopt a Neutral and Process-Driven Mindset
The key is to maintain a neutral and disciplined mindset. Focus on stocks and sectors that are performing well, and don’t hold on to past biases. View each investment as a fresh opportunity, like buses that keep coming and going. You must have confidence in your process and be willing to board and exit as necessary.
Small Losses, Big Gains
The mantra for successful investing lies in keeping your losses small while positioning yourself for substantial gains. Be flexible, stick to your strategy, and embrace the possibility of a long-term run when the timing and performance align. Let me know your thoughts on this approach!
WeekendInvesting launches – PortfolioMomentum Report
Momentum Score: See what percentage of your portfolio is in high vs. low momentum stocks, giving you a snapshot of its performance and health.
Weightage Skew: Discover if certain stocks are dominating your portfolio, affecting its performance and risk balance.
Why it matters
Weak momentum stocks can limit your gains, while high momentum stocks improve capital allocation, enhancing your chances of superior performance.
Disclaimers and disclosures : https://tinyurl.com/2763eyaz
