Why timing does not work- ithought’s market wrap, NO: 102
JIT, Just in time is a brilliant idea that captured the imagination of the manufacturing space. But, when applied to equity investing, the outcomes are mostly disastrous. Why do we say this? JIT works well only when you exactly know the right time to possess something. Investing doesn’t allow you to precisely know that. Therefore, investors who believe they will buy into equities just before the rise mostly end up buying stocks well after they have risen significantly. You simply can’t time the exact moment right and you are only trying to cut it too fine when there is no need to. Investors who believe they are smart actually end up being downright silly. The bad experiences that result from trying to be a brilliant timer warrant a serious rethink. If only we avoid trying to time things too finely, we will ensure that we will be invested adequately around the right time. Accept that your timing could be a bit off the mark and keep some monies stashed away for a rainy day. If things get even worse after you bought equity, buy more when things get worse. This simple approach will help you actually do the right time with equities. Importantly, it will ensure you are not left out of the party. Remember, the festive times always return. Happy Diwali.
Capital isn’t scarce; vision is.
Managing anxiety is the most important aspect of investing. The global volatility has definitely raised domestic investors’ anxiety levels. This has only made decision making even more sporadic and difficult. From experience, conviction shown in the most volatile phase pays the best dividends. The trick is to hold one’s own judgement at a time when the world is most judgemental and in complete agreement. How does one stand against the mob? Building conviction is the only way to accomplish this. Conviction doesn’t get built in a day. Also, it may be tough for a lay investor to build the conviction all by himself. A simple approach is to identify fellow investors to exchange views, share anxieties and collectively overcome fear. Choosing the right company is important. Another important thing to do is to identify columnists with a pragmatic bent and to follow them closely. The views of investment thinkers and opinion leaders must also be closely watched. By tracking the mood and working on one’s own anxieties systematically, one can develop the ability to stand up to the crowd. It is time to learn the art, if you aren’t standing up yet.
To profit from the next rally, learn not to wait for the previous bottom.