Today’s fall has been fantastic! There are falls and there are down circuits but this is special- 5% down on a non circuit day is something. However, with the pace it was rallying upwards, it was also not totally unanticipated.
This brings me to an important lesson market teaches you and the one you must learn early on. On a long term basis, if you’re making around 15% compounded, you’ve done well for yourself. At around 20% annualized, you’ll join the league of legends who are worth north of hundreds of millions of dollars. So to get used to making 2% a day is expecting an average of 1000 in T20s.
How do I see the current fall? Well, if BSE was going to go up 40% in a week, it had to come down 20% in two days. So this is the importance of staying in the game, for longer term than just the happy days and waiting it out patiently until the market rewards your thinking by moving in your direction. Most people who were looking to make quick bucks have realised making money is difficult and to maintain it is even more so, in an environment when if you get 5% on FD, you’re lucky.
There has been a new generation of day traders who have flocked to the market in last year or two when making money suddenly became easy- you buy the dip and it goes up, simple. You chase momentum and money triples in a month or less- Simpler. This is I believe the beginning of a strong trend when you’ll see failed dips and multiple months when buying dip can get you killed. How do I believe I’ll behave? Well, not differently.
If you can survive these blips, dips and corrections, not buy junk and have a clear vision of what the company is likely to become in three five ten years, everything is a buying opportunity. The only thing you can’t always do is to buy as nobody can have ready cash available to be deployed everytime. So, when Markets correct and your portfolio bleed, be happy that you’re up 100% for the year and another 5% would have been great but not having it won’t kill you either.
This is why people who have thrived in this market have stressed on one thing- you must learn to survive cycles. You can make 100x in one cycle but can lose everything when the market turns and get burnt badly. This is not what we’re aiming at. We are here to make some money in 2021 and then conserve it to grow in 2022 and still be around when it’s 2025 so that come 2030, you’ll look back and say, oh I’m up 5-10-15x in ten years and it’s been a great journey.
Think long term, be bold and remain invested. Don’t buy junk, work hard to build a portfolio which can weather price corrections. A ten percent drop is nothing. You must be prepared for 20-30-50% drops in order to make 20-50-100x your money.
Life is all about Compounding! 