In Hindu religion, we have the trinity of Gods. Each one of them have their work cut out. Brahma is the creator; Vishnu is the preserver and Shiva is the destroyer. I often wondered, while growing up, why is Shiva (leave aside his grandeur and mysticism), worshipped for being a destroyer. Destruction in our day-to-day dictionary is often equated to malus (bad). Much later I realized that entire universe thrives only on destruction. Matter needs to be destroyed in order to re-create. Shiva, also known as Mahadev (greatest of all Gods) took the onus of doing the most difficult task of destruction for the cyclical resurrection.
Taking a slightly micro investment view of this analogy, there are crests and troughs in stock markets. The stock market cycles are ridden with creation (rise), preserva
tion (range) and destruction (fall). This is inevitable and true globally.
Many people get the superhero feeling in the bull market. They feel that they have the wherewithal to deal with any crisis. The misplaced over confidence is driven by screaming headlines about the exponential rise in prices. Even dirt appears diamond and money making seems so easy. First time investors who have not seen a full cycle should be especially wary of such euphoria.
But when the shit hits the fan, all hell breaks loose. Forget the first timers, even some of the smartest crumble under the pressure. Omni present experts on TV suddenly vanish, there is chaos and clutter all around and dire predictions of impending doomsday float everywhere.
An investor who is not afraid of the destruction peril, hyped pessimism and optimism and one who can maintain his composure when these cycles play out is the true superhero.
Remember, nothing in universe is permanent. Change is inevitable. Panic in stock market will give way to calm eventually and vice versa. Just don’t give in to hysteria. If you do, you are doomed as an investor.
The important question is how can one maintain this composure.
Belief is perhaps the most underrated aspect of investin
g. Conviction in choices backed by reasonable amount of research is fundamental to investing. If an investor has this faith, then steep falls and rise present enviable opportunities. Panic gives way to composure.
This belief should be coupled with a plan. I call it“Method in Madness”. When markets are tumbling, if you have excess cash then break it into 3-4 buckets. Ignore the noises around and invest money from buckets in tranches emptying them one by one at a certain fall frequency. This fall frequency can be devised by you or you can consult a financial adviser.
Another important point to keep in mind is to know whether you are investing or trading. Be clear in your mind what you wish to be and what you wish to achieve. Don’t shuffle between the two based on the profit and loss in your portfolio. However, if you wish to be as omnipotent as Shiva then clearly demarcate the funds for each of the strategy. Make sure you do not mix the ear marked fund.
If you are already fully invested, do not hesitate to reshuffle your portfolio. Come out of fundamentally weak stocks and add quality. Lot of investors don’t want to sell the stock if it is in the red no matter how poor it is in quality. This is cardinal sin. Don’t get emotional about your stocks or let ego dictate your investments.
Markets are slaves of earnings and will revert to mean at every opportunity. Distortions are transient. Keep an eye on long term valuations. Don’t fiddle unnecessarily.
Equilibrium in universe is maintaining by continuous battle between creation, preservation and destruction. Investing equilibrium is achieved by acceptance of the market cycles. The key to success lies in following the method and not in being Mahadev ourselves.
Enjoyed this article?
Follow to never miss an update
