September 25, 2016
As we go through another major macroeconomic event a.k.a. demonetization of Rs. 500 and Rs. 1000 currency notes, it may now be time to sit back and ask ourselves in what way this episode has affected your stocks and the impact it has had on your portfolio.
In the short run, the stock market is like a voting machine, driven by heavy emotions and hype. In the long run, however, it behaves like a weighing machine, where only fundamentally strong businesses make money for investors. Hence, demonetisation may prove to be a blessing in disguise for smart investors.
The noise surrounding such events is responsible for alarming the audience and swaying public opinion by unfortunately presenting the events in a biased manner. This makes sure that one is always in a state of fear over the so-called imminent recession. Many companies might report depressed earnings during the next 1-2 quarters. But, maybe, a year later, you would just be ruing the missed opportunity presented due to such volatility. As Warren Buffett once said, “Be Fearful When Others Are Greedy and Greedy When Others Are Fearful”.
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Excerpts taken from Fear & Greed: Don’t Let Emotions Come In The Way Of Your Stock Market Success