I’ve been busier than usual for the past few days and I’ve only been able to look at headlines and glance at my portfolio from time to time.
I looked at my portfolio today and saw that iShares S&P India Nifty 50 Index Fund which is a Nifty based ETF that trades on the NASDAQ, and was down about 5% a month and a half ago is up 10% today. As much as I like to say that it is the nature of the markets to surprise you, and you should always expect this — I was really surprised to see this move.
Nifty itself hasn’t moved as much during this time period, and it is the appreciation of the Rupee along with the Nifty that has brought about this quick positive up-move.
The last time I bought iShares S&P India Nifty 50 was on August 27th of this year, and at that time the dominating thought in my mind was how much should this fall further to warrant more purchase? I couldn’t imagine at that time, and this is not too long ago that the ETF will be up so much in just a matter of days. I bought this with the intention of holding it for a long time so it didn’t matter if it was up or down in a few days.
This is what I had tweeted then.
Gotta take advantage of the carnage today, added to my INDY position.
— Manshu (@Manshu) August 27, 2013
If you follow me on Twitter, you can pretty much see that there is a very simple pattern I follow. Buy when the market falls and sell when it rises. The buying is usually a lot more than selling because I usually buy in installments but sell in one lot.
This strategy has worked well for me since a number of years, and I was wondering today why this simple plan is not part of mainstream advice, and why it comes across as market timing which most people absolutely abhor.
For any long term investor who views buying stocks as buying businesses (a la Buffett) – why is price not a factor while making a purchase?
I like the concept of SIPs (Systematic Investment Plans) to the extent that I feel that they save people from themselves by enforcing discipline on them and not selling in panic, but this can’t be the final stage of how you view and invest in equity.
If you invest in shares at all, and it is quite understandable if you don’t, then the ultimate goal should be to reach a place emotionally where you can have the courage to buy more when the market falls and sell off when you see euphoria in the market.
This is of course very hard as I know from personal experience and not many people are able to do it. That is perhaps the reason why not many people write about it and it is nowhere close to the mainstream idea on equity investment.
If you have SIPs then I’d suggest giving this a try. For anyone beginning, I think an easy way would be to save some money specially with this purpose, just let it lie in a savings account which can be easily accessed by you, and identify some stocks and mutual funds that you would like to invest in. Then when you hear panicked stories on the news, and read about doom and gloom in the papers, use that money to buy stocks.
You risk the money you invest, but the return can be learning a very profitable process that will continue to reward you throughout your life.