The markets fell ten days in a row without respite. Investors waited for a bottom, watching most of the time. Then, when the technicals reversed, stocks rose sharply overnight in the US markets. The investors who waited and watched are now anxious if the Indian stocks they wanted to buy will still be available cheap.
The point is simple. When the stocks were trading at valuations which we liked, most of us simply watched. Watching must be done only in a particular context when we find valuations overstretched. That is the time when we must hold onto cash or raise cash.
If the markets are falling regularly, we need to turn very stock-specific or theme-specific. Falling markets and depressed sentiment are too precious to be wasted. Investment actions taken during times of despondency are the biggest drivers of superior portfolio returns. Most investors know this too well. Yet, they wait without purpose simply watching others who are also waiting.
Now, wanting everyone to act along with us won’t help us do the right thing in times like the present. When opportunity knocks, it doesn’t make sense to snooze. Money must be swiftly put to work when the valuations are right.
Valuations are low purely because sentiment is weak. When sentiment reverses, valuations won’t be waiting for us to buy. The cheese would have moved by then. Investors must use weak sentiment to go long into the right valuations. This may be done in multiple tranches so that you catch your desired picks at different levels and participate adequately during market lows.
Simply watching while doing nothing will leave you like the spectator sitting on a station bench who waited for an empty train only to end up missing the last crowded train.