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We have seen some dramatic market action over the last eight months.
An eleven-year bull market turned into a bear market in less than four weeks, the fastest on record.
From its high on February 19, the BSE-Sensex fell more than 37% to its March 23 low. It then bounced around 30% off the bottom over the next four weeks.
Since then we have had up days and down days, but the market has mostly held its ground and has risen another 20% over the past six months.
Speaking with the benefit of hindsight, the easier* money has already been made.
(*Investing is never easy, and thus I have used ‘easier’)
This is the time to be extra careful and selective. High-quality businesses are not available at attractive valuations anymore. Low-quality businesses are to be avoided anyways.
Do not invest assuming the pandemic has ended, and everything is as bright and optimistic as it was at the start of 2020. Nobody has any clue of when this will happen.
But if you have done your work well while investing, you have some clue of how robust your underlying business is and how much staying power it has in the face of economic and financial adversities.
So, invest purely based on where you see the earnings and cash flows of your underlying businesses heading, not over the next ten quarters but the next ten years.
The hardest thing for investors to do is to become disciplined, but that is what is required of you now.
If it is your money, be careful.
If it is not your money, be very careful.
Successful investing is less about when to act and more about when not to, less about what to do and more about what not to.