The best investments are done during times of uncertainty and tough conditions. Market overreacts to good news and bad news. They respond more strongly than what is appropriate. That's why when Modi took over almost 20 months ago, it touched an all time high with out any change in business fundamentals. Today it is overreacting to many negative cues on global as well as domestic fronts. These are cycles and while we can't predict accurately when the direction will change, one thing is sure. In the long run, markets will behave rationally. The broader markets have come down by about 20% from its peak without considering long-term market prospects.
Some of our best companies whose stocks we hold, have also corrected significantly making them juicer. It requires a clear mind void of confusion and one that appreciates 'business like investing' to identify the opportunity. The same market that behaves in an irrational manner will be rationale in the long run, the ones who understand this will profit immensely. Again this cant be borrowed belief, it has come from ones own experiences and analysis.
We have seen world-wars, Lehman crisis, terrorist attacks, but we are doing well. That's the nature of the world and business. As the RBI governor rightly summed it up, The Stock Plunge is a market problem, Not Economy's. We must differentiate between market sentiments and business fundamentals.
Invest when times are tough and there is no better time than today. We need to be mentally prepared to do this as we normally get swept in the emotional turbulence. You can start by looking at recent looser, stocks that have been battered between 20% to 50%. Make a list of stocks that you wanted to own but found them expensive in the past, they might have become reasonably cheap. Make the exercise objective and attach no emotion to this. The Sale is on
For help and a list of stocks that we wanted to own and are on sale please email research@learninvest.in
