This market rally reminds us of the movie Shrek and the question, are we there yet? Talking, annoying donkey from the movie Shrek, who kept asking are we there yet? Someday we sure will be.
Are we there yet? Is this the top? Is this the right time to invest? or also in other local street parlance, Yeh level pe market kya lagta hai?
While these questions are not overtly bad, the genesis is, that everyone wants to invest right at the bottom and sell right at the top. The only problem to this that only in hindsight, would one know what is the top and what was the bottom.
Best time to invest in last 2 decades were,
in March 2020 – Covid Crash
in September 2013 – Currency crisis or
in March 2009 – Global Financial Crisis bottom or
in September 2001 – Dot Com Crash Bottom.
So, if those absolute panic bottoms have been 4 in last 2 decades or so, is there a real point in obsessing over it? But mark the common thread amongst all those 4 points, they came amidst crisis. Make it a point to ask the question next time there is a crisis to ask if it is an opportunity.
But as Charlie Munger says and suggest to “Invert always Invert”, The correct question should be, is this a time where we should NOT be investing or remain invested?
Maybe, one would argue, it would have been prudent to not invest
in Jan 2000 just before the Dot Com crash or
in Jan of 2008, before sub-prime blew up the globe or
in Jan 2018, when government policies intended to clean up the economy ended up disrupting it in the short term.
However even in these times, if you move your vision from 1-2 years to 5 years, the outcome still would not have been bad.
If this is the last 2 decades’ history and we can put forward an argument that we are at a better stage in the economy and markets, then we have been at any point in the last decade then ideally, we should not be worried on whether we should be investing now, but rather focus our energies on which are the megatrends developing, where is the value migration likely to happen? which are the companies preparing themselves for the future upheaval? where are the odds stacked in our favour with longer-term horizon?
We cannot have an investing strategy that focusses on the extremes of the market all the time. In fact, focussing on the same can be very counter-productive. Every future market correction seems like a threat and every past market correction was an opportunity in hindsight. If we give up our obsession with finding the extremes in the market it will take away most of our worries.