In the last post, we talked about as to, why are we afraid of Equity Markets?
Let’s today discuss, why are we shaken in our own conviction bets, once markets start correcting significantly.
Markets Globally have been correcting these days, due to Chinese Yen Devaluation (which means China is depreciating its own currency, so as to make Exports, across world too much competitive in turn catalysing & igniting the Currency War, specifically for Emerging Market Economies, such as India) & hence India too is not insulated from the economic happenings across the Globe.
This currency war started by China, has resulted in a Crackdown of around 1100 Points & 300 Points in our Broader Benchmark Indices (Sensex & Nifty) today. Shall we also become a part of this panic selling & sell our conviction bets at losses or at a meager profit?
All these meaningless thoughts, are flooded within our brains, from all nook & corners & as per our Human Investing Psychology, we tend to do normally, as per per our belief of our own fear.
Also as very aptly said by King of Wall Street-Mr Warren Buffet-“Buy when others are Fearful & Sell when others are Greedy”.
Hence our strategy, during these times of extreme volatility, should be to move a surplus from our Monthly Earnings, in a systematic way, to our Understandable Businesses & Managements, which definitely would become our conviction bets. This approach, would help us in enjoying the Rupee Cost Averaging. In other words, we should avoid investing Lump sum amounts, when every1 is busy in chasing the climbing stocks.
Food for Thought: Use SIP Mode for a Long time horizon, even investing a meager amount of money, over years & years & enjoy Multiple benefits of as: Skewed Risk reward ratio in your favor, Rupee Cost Averaging, as said earlier, along with Compounding Growth Machines (High Conviction Stocks or Businesses), which you own stake in, i.e. your conviction stock. This in turn would eliminate the Beta element of risk & volatility as well.
Bharat Sahni
PlanUrMoney 