How to Make an Opportunity Fund: A Smart Strategy for Investors
Do you want to invest your money in the stock market? If yes, then you might have heard of the term “opportunity fund”.
Opportunity Fund:
An opportunity fund is a special fund that you can use to buy stocks when the market goes down or crashes. This can help you make more money than most people.
I have made this strategy after a lot of thinking . And I hope it will teach you a lot of new things.
[1] What is an Opportunity Fund?
For example: let’s say that you have already put 5 Lakhs (at good levels) in the market. Now the market is high.
What should you do? Should you stop investing? SIP? Bulk?
[2] The most important step in such a situation is to have an ‘opportunity fund’. This fund needs to be used wisely when the market (a) falls (b) crashes.
[3] Let’s understand some key points:
- You will make most money when you invest in a crash (if you check the 2008, 2020, etc), the market from its lowest to highest point AT LEAST went up by 120-130%
- Now you can’t guess the lowest or highest point
- But, you can invest along the way down. This will hopefully give you an average gain of 60%
[4] The problem is people spend all their money because they invest too much in a rising market.
[5] Here is how you should think about the math. Let’s work through an example:
- Let’s say you already have put 5 Lakhs in the market before the highest point (now you would be making money)
- The new money you will put in a high market is unlikely to grow at more than 12% (average NIFTY growth). ¹
- Now your first goal should be to have 20-30% of money called opportunity money, which you can use when the market goes down or crashes.
[6] Now why 20-30% opportunity money?
- Well, it makes more money than the market
- This is NOT something MONEY MANAGERS can do.
- When you give them money, they HAVE TO invest
- We have no such rules. And, therefore, I keep saying that normal people (with all the freedom) can easily beat most money managers, if they learn stuff.
[7] Okay, so let’s do the math:
- 20% money (i.e 1 Lakh) you have saved it
- This will grow on an average at 8% (you can easily get this in a bond) ²
- The growth you are missing is 4% per year
[8] A crash usually comes every 5 years. And, let’s say that you are able to get average gains of 60% by investing a lot then (so this is roughly 12% per year — rough math!)
Plus your 8% that you are saving now (so this opportunity fund roughly should make 20%)
Now this is 1/5th of your money. Rest will grow at market rate.
But this 20% will make the difference for you.
[9] Now the problem is people are impatient, they can’t wait for 5 years. Or can guess the next crash. But, honestly this is pure math that beats most money managers.
No one will teach you this, because it hurts their business 😉
I have explained the math with 20%
You can do anywhere between 20-40%, depending on how you feel.
[10] What should do in 2024?
- you have saved good money in stocks (already on very good gains)
- Now your goal should make more money in the next 5 years together, not this year only (very short term
- So unless you see very good deals, you won’t buy.
- GOOD DEALS will keep on coming in the market. You don’t need to hurry for anything.
- I’m giving only my opinion not because I am GREAT investor or something, but because I am following a METHOD. And, being very patient when most people can’t.
33%-40% might look high — but see guys, I am changing most of this into cash flow real estate. Here I will make a return of 10-12% easily overall. So I am increasing my amount; you don’t need to go 33%-40%. You can stick to 20%.
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