In the current financial year, the frequency of global events appears to be significantly higher. Just a few weeks ago, we heaved a sigh of relief that oil prices were trending lower and presented a far lesser threat to inflation. Now, it appears that expectation may prove to be misplaced. But, give it a few weeks and we could be in an entirely different situation. Predictability is falling sharply, and global sentiment is beyond anybody’s guess. We don’t know when the next crisis will hit us, or where it will start from.
In such situations, one should learn to stay better prepared. By being prepared, one can quickly assess the problem, gauge intensity, evaluate longevity, and measure extent. Once we get a sense of how things are playing out, we can begin to see how to turn the situation into an opportunity. This would mean looking at specific sectors and companies temporarily affected by the crisis. We would be able to identify opportunities in some areas that are affected by the sudden fall in sentiment and where things will revert to normalcy in due course. Where we find such opportunities, it is important to deploy capital gradually to build our portfolio, strengthen it further, and scale it further.
Achieving scale in investing should be the priority of every investor during difficult times. By focusing on what one needs to do rather than bothering too much about sentiment, we can invest when others are not willing to, scale up at attractive valuations, and populate our portfolios with stocks purchased at the right prices. These actions when done with focus and conviction will lead to superior returns when the markets recover from the crisis and settle down later. This will lead to achieving scale in a disciplined manner, avoiding knee-jerk reactions in your investing and developing the right temperament for the volatile times ahead.