Will my portfolio fall further? How far will it fall? These are the two questions that unfailingly pop up in every bear market in every investor’s mind. The questions only return unfailingly in every market cycle to receive the same core answer. “I don’t know”.
But the experience gained in every cycle adds a line to that answer. “I am well prepared for a further fall.” ” I will invest steadily through a fall”. ” I want to use this correction to scale up further”. With the experience of every market cycle, the investor in you turns more sober, realistic and pragmatic.
This helps you make the most out of the deeper market corrections when they do happen. While you don’t know exactly how to predict them, you are inevitably well prepared for them. Becoming better prepared is a constant pursuit of every investor. This preparedness is what leads to superior investment outcomes. Those who prepare well tend to be more decisive and that makes all the difference.
Investors who fail to prepare and refuse to shift focus tend to spend too much time in analysis- paralysis. This leads to extended phases of inaction in their investing. In hindsight, these phases usually look like the most costly misses. The current market phase could well be the time to exercise conviction judiciously and avoid inaction. If the markets fall further, one’s conviction should only get stronger. Directionally, conviction should grow when markets fall to levels when valuations make decisions look like no-brainers. Even a few decisions made around market bottoms will make the entire journey worth the effort. This is no time to blink or buckle.