A lot of messages asking me if one should exit FDs, Debt funds & buy the dip. This is what I am saying: Not every dip is like March 2020 where the bounce back is immediate. This time around, if things get worse, it may take a long time to recover. Nobody knows. 1/5
If stocks are down 30-40%+, it could be that something has fundamentally changed, even if there is no news about it out there. Markets are super-efficient in the world we live in today, if something seems too good to be true, it usually is. 2/5
When investing, the idea is to buy a stock that is strong and not which is weak. Assume there are two stocks, A & B both at Rs 100. Say A drops to Rs 50 & B remains at Rs 100, the odds of B going up is much higher. Sounds counterintuitive, but that is how markets work. 3/5
We sell winners and average down on losers—this is called disposition bias. This strategy can go horribly wrong. Ask the lakhs of investors who kept buying Yes Bank on its way down from Rs 400 to Rs 10 by exiting all their profitable investments. 4/5
zerodha.com/varsity/chapte…
zerodha.com/varsity/chapte…
While the stories of people creating wealth with concentrated bets in one or two stocks sound nice, the odds of that happening is one in a million.
The best way to invest for the long run is to diversify broadly and have enough cash equivalents for emergencies. 5/5
The best way to invest for the long run is to diversify broadly and have enough cash equivalents for emergencies. 5/5
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