Who are you listening to?

Amar Pandit , CFA , CFP

I am writing this post not from a perspective of giving answers (though I shall give some answers) but from a perspective of raising questions and making you think. I urge you to think through this post and spark a conversation with a wise person (not smart). The reason I wrote this post is that I started seeing many more idiots (not the ones who chase excellence) scaring investors about where the markets are headed (as if they know). Frankly speaking, they do it with so much confidence that many instantly latch on to their ludicrous predictions.

Look at this Prediction made on March 25, 2020:

Now Look at this Prediction from the same institution on November 16, 2020:

I am not singling out any institution here. The above statements are shown to make a key point. There were many who were screaming “run” between February and April 2020. The same people are now either still screaming run or some others who have now changed their forecasts to invest all that you can. There will be many who will keep screaming always. It is just their business to scream and sound intelligent. Pessimistic people do look like our friends and someone who has our interests at heart (no matter how damaging these folks are; they feel good).

Think for a minute.

Does this help you in any way? All I can see this doing is increasing your anxiety and clouding your judgement. Many just freeze, listening to this garbage (yes, it is garbage from people who either do not understand the way markets work or are misleading you on purpose). Some of this can even come from well-intentioned people, some who genuinely do not understand (but believe they do) and some who like to brag about their investing skills.

In March 2020, the thing was the markets are going down. In November 2020 now, it is the same.

Do you really think these guys know the future? What made you believe them then? What is making you believe this garbage now? I know it sounds safe and comfortable to believe it. However, you need to accept one reality. The stock market will go up and down. Just Accept it. This is an uncertain world, and no one knows what will happen the next day but there are 2 fundamental truths:

  1. The Stock Markets will go up and down.
  2. For a developing country like India, over the long term, the stock market trajectory is upwards.

I wrote a post called Embrace the Bearon March 13th. I followed this up with Embrace the Bear – Part 2 on March 23rd, 2020. The focus of these notes was that this is a once in a decade opportunity to make abnormal returns so invest if you have surplus and stay invested if you do not. The ones who did invest are super pleased with the outcome.

Remember Buffet’s quote “Those who invest only when commentators are upbeat end up paying a heavy price for meaningless reassurance”. The point that I have made several times is that investing is uncertain (which means the values will fluctuate) but have you ever seen any diversified portfolio of investments or even the stock market of a country like India going down over the long term. Looking for certainty in an uncertain world is a recipe for mediocre outcomes.

Let us assume for a minute the stock market goes down after you invest.

Do you think it will stay down?

No, it will come back up and cross previous levels. Even after one of the swiftest falls ever in February –March 2020, the markets have made new highs. So, the markets will continue to make higher highs and higher lows. If they go down again, they will be up. So, what is the issue? Are you investing for 1 month or 1 year? No, you are not. Most of you invest for decades even if we do not know what the money is specifically for.  So why do some of us wait?  We wait because we read news from fear sellers and we tend to buy it. We even fall for things like we will be able to buy cheaper later (you should know by now that most often later is never).

Do you want to buy the lowest? Do you think it is possible? Rarely. You might get it once (if you had invested on March 23rd, but chances are you have not). Also, markets do not go down sharply by 35% every other year. Additionally, if you have not bought when markets are low, what makes you think you will do it the next time it happens. Frankly speaking it does not matter when you invest if your time horizon is long enough. When I have excess liquidity, it is deployed almost immediately. I personally am not a fan of market timing because we cannot do it consistently and secondly it does not matter. You should re-read this post Don’t be a Jim. Behave like Sueto understand how timing is injurious to you and how you are best served by not trying to time.

People take advantage of investor insecurities by spreading bullshit. If the Sensex goes to 50000 or 55000, will we stop investing? If the market goes down to 30000, will it stay there for the next 5 years? The point is that we should not allow anyone including a well-intentioned friend (who thinks he knows about the markets but does not) to come between us and our investment strategy. The only way for investors to make money in the stock markets is by investing in a diversified portfolio (to manage risk) and then staying invested through all times (not to mention investing more if you have surplus during crashes). The real secret of the wealth creators is TIME (I cannot repeat this enough).

Nassim Nicholas Taleb’s quote should keep ringing the bells in your head “Minimum exposure to the media should be a guiding principle for someone involved in decision making under uncertainty – including all participants in the financial markets”.