The Stock Markets are Going Through a Solid Consolidation. I know Patience will be Tested. You might want to switch everything to Other Countries etc. Hold On !!!
In my last 20 Years in the Markets, this is nothing New.
Here is my advice for all Investors who are reading this. Read slowly. Bookmark. Share Widely for your Long Term Audience to Read.
a) If you are a salaried person who gets salary every month, please use this opportunity to add more shares of your business. Increase the investment amount month on month without affecting your daily lifestyle. Please do not over expose. Just continue your SIP in markets or mutual funds. As the businesses get cheaper in value, you can invest more as well. Since your horizon is for a decade or more, you won't have sleepless nights even if stocks correct from here.
b) If you are not a salaried person but have good dividend flow monthly or quarterly like me, please consider deploying good amount in great companies at this time. For me personally, in the last few months, many businesses have paid good dividend. I am enjoying this correction and adding good high growth businesses at this time.
c) If you are not having money at all to invest and are fully invested, this is the right opportunity to shuffle portfolio and get out of businesses where the balance sheets are poor, earnings are lumpy etc. This is applicable for above salaried personals as well. You can deploy the money into businesses which are strong instead. If businesses are already strong in portfolio, then do not do anything. Just enjoy the markets from sidelines.
d) Either way, use this opportunity to clean up the portfolio. I keep saying - Do not feel that a business which corrected 80% is worse than business which corrected only 50%. Do not take call purely based on price. If earnings are significantly impacted, but you see that they will perform much better moving forward, you can buy more of the same businesses irrespective of price correction. If you feel they will not perform well, sell out. Period. Again I repeat. Do not base decisions purely on price corrections etc. Look at business fundamentals and performance.
Note: This is a good time to book short term loss on businesses and re-enter the same/different businesses the next day (slightly price will be up or down). This will allow you to show short term capital loss on your IT returns and also give you a new sense of ownership of same businesses. This is something I do when there is a major correction. I do not buy something new. Same businesses. If you do not want to do this, perfect. No compulsion.
e) Exit Whatsapp/Telegram groups if you get influenced easily. If you have an independent view and are not at all affected and have a lot of time, only then indulge. Else, best to stay away.
f) I read a beautiful quote. If you do not read news, you are uninformed. If you read news, you are misinformed. So, Be informed. Period.
g) People will ask you - What did you learn from last week crash etc? Ask them to go and take a hike. We do not learn anything from one week of price movement. Price movement analysis is for the media to do, especially in short term. We should only focus on business movement. Stay in market and stay the course for more than a decade. Then you will learn that eventually price follows earnings and not the other way around. That's what I have learnt.
h) I am seeing many people saying that having cash is a learning. I don't think it is practical. Let us most respectfully agree to disagree if you have a different view. Let us assume that someone was sitting on 50% cash when the first red candle was formed. They might have deployed 20% on a fall. Now, lets say another 10% drops. They will deploy the other 20%. Lets say another 15% drops. They won't have cash. How will they know the bottom? It's humanly not possible. So, basically, cash is an asset only when market falls. Else, its a liability. You will see many telling you that cash is king. Yes they are absolutely right when market falls. And wrong when prices move up. But, frankly, I am always fully invested. The only way I have cash is, by selling some of my stocks to buy something cheaper. Or wait for my dividends to flow. I have never sat on a lot of cash :-) Those who had cash for this crash, hopefully have used it wisely.
g) As some selective stocks look good today, please please please do not borrow and invest. Do not sell something you need and invest in the dynamic markets. This is something I have said multiple times and repeat again and again. Deploy only the money which you do not need for the next 5 - 10 years in the market. If you are a trader, then this advise is not for you, my friend. This is for investors only.
h) Associate yourself with people who have reached where you want to reach. If you want to make quick money, associate people who are making quick money consistently. If you want to create wealth over 10 - 15 years, associate yourself with people who have been there, done that. Association Matters.
i) This is the best time to buy businesses which you are perfectly in sync with. Buy something you understand. Do not wait for someone else's view on this. If you trust the management, see immense business (not price) potential, and find it trading at mouth watering valuations, just go for it. When tides turn, the price will follow.
j) Do not gamble with your hard earned money. Don't go for quick 20% returns. Focus on businesses which can give you 15 - 30% earnings growth in a long term period with good dividend yield. Margin of safety is important.
Lastly, friends. The Stock Market has created wealth for many of us over a decade. For me personally, the crash of 2008 & 2020 was the best thing that could have happened. I added more and more of my salary ÷nds during the worst of times which has, with god's grace and market's blessings helped over a period of time. So, market is a friend. Not our enemy.
Let us trust the businesses and definitely, earnings will follow price over period of time. As I say, if businesses continue to grow their earnings with strong balance sheet, neither you nor me can stop Wealth Creation !!!
Keep the SIP going. Follow the Process.
Let's enjoy what is in store for us. Downturn or uptick, let's chill.
Cheers !!!
#FI
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