7 February 2013

Mailbag: Don’t pray for stock market corrections!!

If you are a regular reader of Stable Investor, you would know that we are very public about our interests in market corrections. This is because it gives ample opportunities to buy stocks at distressed valuations.

But in our post about Buying on Dips, we received a comment from ‘HP’... This comment made us sit down and think. Comment reply which we wanted to post, was too large to fit in the comment thread. So we thought of replying it with a post.

mailbag reply

You can read HP’s comment below:
Note: The reader used ‘HP’ as his name instead of his/her full/real name.

- - - - Start of Comment - - - -
I am not sure if you were already working in early 2009, but my guess is you were in school/collage back then.
Hence talking about it as just a random thing that had occurred.
The world went through Hell literally for what we call now as "Worst Financial Crisis" of last 100 years.
Every day people were fired from their jobs (Especially in IT and Finance) and those of us who still had a job were considering ourselves very lucky.
Each day gave lot of pain seeing our loved ones and friends getting fired and seeing an absolute uncertainty about what is going to happen to them (Specially the married folks)
So when you pray that situation like 2008-2009 to return just because we will get stocks at throw away prices, just be careful, your wish might just come true.
And if it does, My Friend I would like to see how you react, I am sure by now you are done with your graduation.

It would be interesting to see if you really stick to your principles or all this is just pep talk, especially when your entire so called world is falling down around you.

- - - - End of Comment - - - -

We agree completely with what HP has to say in his comment. It can be tough to think about making investments, buying stocks at cheap valuations when your own job is at stake. And it can be painful to see people around you losing their jobs. And for record, our site is young, but we were not school going kids in 2009. Like you, we consider ourselves lucky to be employed during 2008-2009.

When we say that we would love to have a correction, we don’t mean that we would like to see people losing their jobs. We pray for corrections (only in jest)... and we know that talking is easier than doing. We may or may not be able to hold on to our jobs during the next recession. In a way, it is beyond our control. But what is within our control, is our ability to remain prepared

Before even thinking of investing, we would have our emergency funds ready. Its a fund that would be capable of sustaining our family expenses for next 6-12 months (in case we lose our jobs). And if we are able to cling onto our jobs, it wouldn’t be a bad idea to invest whatever is possible. Because when you fall in hot water, you should take a bath instead of cribbing about the situation and your helplessness. And if you have an interest in investing, you would understand the power of 3Cs – Cash + Courage +Crisis. :-)

So when crisis comes, we can’t say how well we will stick to our principles, but we would definitely give it a serious try. Till then, you can consider all this to be a pep talk which we are giving to ourselves.

dont pray
You should not pray for market corrections.

We are sorry to those who are hurt by our prayers for market correction. It was made in jest.

______

7 comments:

  1. Very thoughtful post indeed, thanks.


    Let me tell you my story. I indeed remember 2008-2009 period. I had graduated and landed a job with Cisco in Sept of 2008 !! I was financially literate in a sense then with budgeting, knowing about Warren Buffett, patience, no speculation etc but never had any money nor any actual knowledge of how the markets functions.


    The initial euphoria turned into paranoia where everywhere there were job cuts and Cisco was badly affected. The mood at the workplace was also pretty tensed. People used to wake up at night to dial in live at the earning reports just to be sure that their jobs were not going to be "restructured". (That was the word they were using). Oldies lost most of their so called paper wealth in stock options. Though we were not affected but still it was pretty difficult situation. I had remarked then that it is the best time to buy stocks since there is blood on the streets. But never had the conviction nor the capital to buy anything. Indeed i think it is very difficult for people who depend on jobs to act in such situations if they are not prepared with rainy-day funds etc.


    I think my whole generation in a way has changed in thinking. None of my friends invest in the markets. I started proper investing from last year. Before that I speculated mostly. Now I am trying to slowly build a decent midcap portfolio but still get scared seeing the falls which even the quality companies have (Carborundum down 10% yesterday). Your blog has been very helpful in that sense. Thanks and do keep posting good quality stock ideas for a longterm diversified portfolio.

    ReplyDelete
  2. @eac333d99ca7a5c5a26699d46104de41:disqus

    As you have rightly said, It is absolutely necessary to have a rainy day fund and adequate insurance cover. And we do hope that we are able to help those who are game for long term investing :-)

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