The Indian markets started 2018 with an exaggerated sense of optimism. Clearly, headline numbers were lagging the markets. As the market moves towards the end of a financial year, that exaggeration is swiftly disappearing and getting replaced by fear.

We could see an overreaction on the other side too. And, investors with little or no exposure to previous cycles are going to be the most reactive to these trends. The challenge before us is not how we manage our investments but how we manage ourselves.
When investments do very well, we stop managing ourselves. We cease to follow the path of good sense and tend to get carried away.  Investments cannot always take care of themselves. They need our active management when their valuations go out of whack. To achieve that, we need to manage ourselves and stick to the path of reason.

The fact that the market was way off the path of reason is now coming home to hurt. While the excess valuations are swiftly correcting now, we don’t know where it can lead to. Stocks tend to become cheaper than we expect them to. We need to manage ourselves well to ensure we don’t let go of that opportunity to invest in equities.

From the need to sell equities aggressively early this year, we could swing to the other extreme where we may need to be buying aggressively. Clearly, we are in preparation hour.

“You can’t predict. You can Prepare.”– Howard Marks

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