Process Builds Conviction

Conviction helps you survive bear markets

Today's post goes a little deeper. There is never a conversation with someone that is not centred around stocks—whether you run into someone in the elevator, walking in the park, or meeting at social gatherings.

Discussions typically have three common themes:

Here is how I read these three.

I am too scared to put money in now.

I do not know how equity works: The beauty of equity as an asset class is volatility. With volatility, you can enjoy many things that come inherently with it—dollar cost averaging, risk-reward framework reassessment, and phenomenal opportunities when markets penalize short-term aberrations for long-term decisions.

Photo by Caleb Woods on Unsplash

When will this tariff tantrum end? Maybe then I can start redeploying money.

Photo by Sivani Bandaru on Unsplash

No point worrying about things that are not in your control: Crude shocks, the Russia-Ukraine war, Trump tantrums—are these things you have any meaningful control over? The only thing you can control, though, is greed and fear. If you are greedy when others are fearful and vice-versa, your outsized returns are not going anywhere.

At this pace, the number of ideas available to invest in is shrinking by the day.

There is always a bottom-up opportunity: It works both ways. During COVID, many SMEs sold sanitizers and masks and raked in crores. Blackstone bought real estate in India left, right, and center post-GFC, and now you see multi-billion-dollar REITs trade and give access to billions of investors.

Photo by Jason Dent on Unsplash

The point is, there is always opportunity, and to say "I do not have enough good ideas" is the laziest argument you can make when it comes to investing.

So what is the takeaway? Markets are efficient and there will always be a buyer and seller. The more you see there is opportunity, do not get swaddled by people who see this as a threat and vice-versa.

Process builds conviction. Conviction helps you see bear markets. Once you have survived bear markets, you can enjoy compounding that happens through bull markets.

It is not always about making phenomenal returns, it is also about protecting your downside when things are not going your way.

What has been your one big takeaway when it comes to investing? Let me know in the comments section.