It is never easy to catch falling knives. Most people who want to have the knife believe they can pick it up after it falls. So, everybody waits and keeps watch as the knives fall slowly. Once the knives fall to the ground, they get into a scramble to pick them up. Equity investors face a simple dilemma now. They aren’t clear whether they must invest now in a falling market or wait for markets to bottom. Our philosophy is to catch the falling knives. We believe in cautiously investing in a falling market. We prefer to be early and avoiding a scramble kind of situation is really important to us. “Being safe rather than sorry” still needs to be ensured and our going into a falling market should still ensure that. How do we accomplish that? How do we ensure that our investing is safe despite our taking risks in difficult times? We invest in smaller increments, show tremendous patience and controlled temperament in tough times. This helps us to keep timing risks under control and at the same time keep investing when fears heighten. We keep our actions in good check and yet don’t stop ourselves from taking risks. Yet, that really isn’t enough in managing to deliver outlier investing to every investor. We need investors to buy into to the idea of showing greed when the entire market is fearful. While we are ready to demonstrate such greed in a measured manner, all our efforts will come to nought if the investor turns fearful. This is a time for investors to buy in to the idea of being greedy when the entire market is fearful. From experience, we will readily vouch that there is no better way to generate outlier wealth. The coming weeks will see the battle lines harden between a small lot of greedy investors and a mass of fearful ones. It is time to ensure you are in the greedy pack.
“Fear is overdone concern that prevents investors from taking constructive action when they should.”
– Howard Marks