Waiting for a Fed rate hike.

Prediction is a risky business. Often, a prediction going wrong can endanger reputations built over lifetimes. Yet, most of the investment world’s attention is obsessed with the business of prediction. Somehow, most people greatly excite themselves with the business of predicting. They get an adrenalin rush either in the hope they will be right or following others who they believe are right. People risk reputations with hourly, daily, weekly and annual predictions. Beyond one year most people in the prediction business don’t show much interest in sticking their neck out. Nobody bothers much about making very long term predictions are those following predictions aren’t keen on applying themselves beyond a year. This makes the very nature of the prediction business plain speculative, short term oriented and trade driven. Investing is an activity with much longer time-lines and active predictions tend to deliver more of excitement and less of returns. Preparation is a relatively more serious business. Investing needs timelines to be much longer than a year. At the beginning of 2015, we had set our expectations low and focused on the year as a year for active investing. Returns could wait and 2015 was the time to prepare for bigger things. This approach helped us a lot and served our investor interest rightly. We exhorted investors to ignore the performance and focus on deployment. Rarely do we get a long phase of consolidation which gives us ample time to deploy more capital in equities. Equity investing deliver superior performance when it happens gradually over time with positions growing as convictions grow. But, markets mostly allow conviction to spike too fast giving very little time for investors to invest enough money. The common investor grouse is that they missed putting money into equity or didn’t manage to put enough. 2015 gave no room for such excuses. Investors had all the time in the world to invest as much as he desired. It was clearly a year of preparation for future returns. The residual weeks of the year will only give a further window of time to get more money in. 2016 will see fresh perspectives on equities take shape. Investors who failed to use most of 2015 to invest amply into equity may use the residual weeks of the year to do so. That bigger investors and FII’s holiday during this time makes it a window for some bargain shopping. If the long investment window of 2015 extends into 2016, it only gives you more time to bargain hunt. Times like these don’t last forever. So, prepare during these times for putting in more money. Good times will return swiftly and catch you pleasantly off-guard.

Expectation of events lead investors to price both good and bad news in advance.

Leave a Reply

Your email address will not be published. Required fields are marked *

2 × four =