Drawdowns in portfolios during bear markets is part and parcel of investing… If you cannot live with that, then you should not be investing… Most investors who have been in the markets for 10-15 or more years have inevitably experienced drawdowns to varying degrees and still lived to see another day.
Personally speaking, I had a dream run in my portfolio from 2009 (when I actually started serious investing) till 2017. And had decent portfolio returns… But come 2018 bear market and my portfolio lost nearly 40% from peak valuations. And this happened within a matter of an year. This was a time period during which the so called “quality” stocks outperformed handsomely and the small and midcaps, even the better ones never moved inspite of decent results. And I was in the latter basket. And post that, from 2019 to 2020, while there was some semblance of recovery, Covid again dented the portfolio and value went down even below the value seen during 2018-19 period. But post this, during the Covid rally, there were stupendous opportunities and we were lucky to have a wonderful ride that made up for all the earlier disappointments.
First and foremost, we have to have faith in our investing process and in the fact that serious wealth creation is possible by investing in good companies and riding them as long as possible. I read Warren Buffett’s autobiography Snowball and the biggest learning from me, (besides knowing a lot about WB’s life) was that it was possible to amass huge wealth by being serious at investing.
Once we have faced a couple of serious corrections and come out smiling, the faith to remain invested increases.
On limiting drawdowns, one can use various strategies adopted by different people. But practically speaking, its difficult to time the markets accurately all the time. You can get them right sometimes, and earn the right to brag, but its not possible to do it all the time. So one or the other correction is going to hit you hard, and you have to learn to ride it. One learning I have always had is that corrections always offer you chances to correct your mistakes provided you are ready to accept your mistakes and act on them. And this kind of action often leads to some serious winners in the ensuing bull run.
The holy grail of generating good portfolio returns is to be in sound companies (and/or companies with tailwinds) , and have the faith to ride out storms that inevitably come around during the journey.
@saurabhshares I don’t track exide, so not much idea what’s ailing it. Beats me why someone should get interested in a stock that’s been a rank underperformer.
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