Monday, March 23, 2020

The Most Important Element In Investing? Part Deux

Carrying on from my previous post in February.Psychology was the most important element number One. Not IQ, not intelligence, not anything. Let us call it EQ.

Which brings me to the second element. Courage or Conviction. As we speak the nifty has gone to 7700 levels and some stocks like Mahindra&Mahindra are at a decade low some are at four or five year lows in terms of price.

The Corona virus pandemic started innocuously enough in Wuhan, China has engulfed the entire world. A billion people in India including myself are in lockdown. The bazaars having hoards of people looking to stock up. The TV full of doom, deaths and sundry.Social media abuzz with conspiracy theories.

Segregate yourself. Your mind and the person you are. The investor and the human being. It is natural to fear for the future - family, friends and the economy.

As an investor its important to find those businesses that will overcome the huge cost that a shutdown has entailed and bounce back.
             POSITIVE      ⇄   BUSINESS CYCLE  ⇆   NEGATIVE

The technique is pretty cut and dried bt what makes the real difference is the ability to jump in when everyone is jumping out! A quote from Charlie Munger-

You buy, how much quantity(versus how much you could), the ability to not let the stock prices going down 20% from your buy rate is what COURAGE of CONVICTION is. I know many clients whom I advised to buy in 2008 and in the short term their fear was borne out as markets fell. Just ONE year later they were ruing the missed opportunity and promising themselves and me that they would not make the same mistake the next time a so called 'Black Swan" opportunity came along.

I wish to remind them that that opportunity has come 12 years later. Will you make the same mistake?

It's so tough when there this so much negativity and so tough to think Two or Four years into the future when your friends and experts, Gurus are stampeding to exit.

At the end of the day KNOW THYSELF is the dictum.If direct equity makes you uncomfortable use Mutual Funds. For everything use %age of your Capital to invest on every dip. DO NOT INVEST YOUR ENTIRE CAPITAL IN ONE GO NO MATTER HOW TEMPTING THE VALUATIONS!

My looking glass says the Nifty can go down to 6000 levels if the panic does not stop. Predictions are pointless.

Process.                                               CCP !!

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