The markets seem to be progressively losing steam. This would show up as weak sentiment, selling pressure, lower volumes on exchanges, and FII outflows. But, there is also a section of domestic investors showing remarkable resilience and persistence in their investing. They are still buying every dip and gradually scaling up their portfolios.
There is a third section of doubtful investors who keep choking their portfolios nervously, more often than necessary and are grappling with rising self-doubt. The questions on their mind “Should I exit and move to fixed deposits? Or, must I repay my home loan by exiting my stock portfolio?”, are hardly unusual. They keep coming back in every market cycle. bear markets test behaviour. And, long bear markets test survival skills.
We are now returning to a bear market, and don’t really know how long it will last. If it lasts longer than people are willing to bear, the patience of investors will further thin. This is not a market to simplify decision making and just buy whatever falls. This is a market to be extremely judicious in our investment choices.
The markets will gradually turn, shift focus on newer sectors, reduce exposure to falling sectors and reposition portfolios for the future. In such a setting, simply buying the darlings of the COVID boom which are correcting heavily may not work. In fact, we could see that approach boomerang as these darling stocks of the market hit lower tops and only fall again.
The better approach would be to invest steadily in listed companies whose managements you have confidence in, bet on investment managers who will deliver against the odds or develop your own forward-looking strategies. This will require continuous homework, tracking of companies, creating watch lists and constantly looking out for opportunities.
The year 2023 may be a very difficult year to make returns and at the same time a great time to build your portfolio for the rest of this decade. The past three years may not be the guiding factor for the next seven years. The future is set to be different and distinct.