INSUBCONTINENT EXCLUSIVE:
By Vijay KediaTiming is not important in
stockmarket, if you are a long-term investor
Investing is somewhat like cricket, where you change your game plan as per the format.
For instance, in a Test match – which used to be an
entire five-day affair earlier, but has become a little quicker nowadays – it is more important to stay put on the pitch rather than time
your entry or exit.
On the other hand, in a 50-over one-day match, timing and sustainability both are important factors
So, you need to do a blending of the two here.
In a T20 match, the most modern version, timing is most important; you have to score on every
Irrespective of how long you sustain on the pitch, right timing is the key to success here.
So what do we learn from this If you are a
short-term investor or trader, you need to worry about your timing, because the duration of your business is very important.
Both
timingas
well as sustainability are important in medium-term investing, while in long-term investing, sustainability matters most.
This is how I look
at the stock market from a cricket match perspective.
We often hear a lot about
market bottom and top
But the eternal truth is: only two people can buy at the bottom and sell at the top – one is God and the other is a liar.
Before investing
in the stock market, you should ask yourself why you are here
What are you playing If you are a long-term investor, then you should not even bother about timing.
What is
timing Why
we want to time the
market Maybe because we want to buy at the bottom and sell at the top
Frankly speaking, it does not happen
Because, we are neither
God, nor a liar
Don’t even think of buying at the bottom, because you simply would not know where the top and the bottom of the market are
Suppose somebody somehow manages to buy at the lowest price
Chances are, that somebody will also exit early
It happens so often that you exit an investment before it matures
Why
Because, you don’t have the conviction to hold it till the stock completes
it cycle.
Instead of waiting to buy at the bottom, use
dips in the market to buy
Whenever there is a big fall, let the prices
stabilise and then buy
When the price
stabilises and there are indications that the market has bottomed out, that is when you should start buying
But the fact is, by the time you
realise the market has bottomed out, you won’t get to buy the stock at its lowest point
That’s okay.
If you are a long-term investor, buying even at a 10-20
per cent higher price from the bottom should not be an issue
Because, you are going to go the distance with it, in which case chances of losing money would be very less
If someone has managed to buy at the bottom, it would be either by fluke or some indication you made for yourself
So, I will still call it a fluke, simply because you cannot repeat that performance every time.
Sometimes so happens that you buy a stock
You are always in doubt how deep the fall will be
So, as soon as there is a U-shaped rise, you will exit the stock with 10-20
per cent kind of gain
Because, you are in doubt that the market has not made the bottom yet
Then you wait to enter the market again when the next bottom comes, which does not actually happen
But you still remain in the game of timing
For long-term investors, timing the market is a futile exercise
It is better to buy 10-20
per cent above the bottom after various indicators confirm that the market has made a bottom, and then stay
invested in it for the long term.
