Time to sweat a bit?

The equity markets are down about 7 per cent since the recent peak at the end of September. It's no big deal, one way or the other. It could be the long-foretold big ‘correction’ or some minor hiccup, heralding a period of stagnation, or some combination of the above. It does not matter. This is part and parcel of equity investments. All you have to do is hunker down and wait for the storm to pass. Every investor in stocks and equity mutual funds knows the drill. Of course, this assumes that your investment portfolio is largely composed of carefully chosen stocks and funds, which I’m sure it is. Isn’t it?

I’m sorry, but did I make you uncomfortable with that last question? If you're sweating a bit at that, now might be a good time for some honest introspection. Did you jump onto those trending stocks that some talking head couldn't stop talking about? Are there a few 'sure shots' in your portfolio that haven't quite lived up to their promise? Market dips have a way of exposing our investment follies, just like in that famous quote about what happens when the tide goes out. But here's the silver lining – these moments also offer a perfect opportunity to reassess and restructure.

However, many investors are now enjoying the fruits of their past actions. Let me tell you about a particular stock portfolio that I look at every day, especially since the market started declining. I won’t tell you whose portfolio it is – it could be mine, or it could be one of the ones recommended by Value Research Stock Advisor, or it could be someone else’s entirely. At the end of most days, while the market has been declining, this portfolio is either up a bit or has decreased slightly less than the market. This happens because, in a well-chosen portfolio, there are always stocks (sometimes many) that do better, sometimes a lot better.

Just a few days back, at the end of a day when the markets fell a lot, I looked at this portfolio and saw that it had hardly fallen at all. Surprised, I went through the individual stocks and noticed that while many stocks had done OK by the day's standard, one small-cap stock had risen by a double-digit percentage. This is a stock that I have been a believer in for the better part of a decade, and it’s quite a story. I won’t tell you the name because that’s reserved for Stock Advisor members, but suffice it to say that it’s a perfect example of what I’ve been talking about. You will never be short of such examples if you care when choosing good stocks. More importantly, you will not be worried right now.

That's the essence of quality investing – not trying to dodge the market's mood swings but building a portfolio that can weather them gracefully. These aren't necessarily the most exciting stocks or the ones making headlines. They're more likely to be steady compounders, businesses with strong moats and management teams that treat capital allocation as seriously as you treat your savings. I’m not saying all your stocks have to be dull. However, when much of your portfolio is focused on quality, you can be safely adventurous with the rest.

Think of it as planning a proper thali – the dependable dal, the perfectly cooked rice, and fresh rotis form the core that sustains you. At the same time, you experiment with an exotic new vegetable recipe or a complicated dessert on the side. Some experiments might not be perfect or even edible, but occasionally, you discover a dish that becomes a permanent part of your meals. The key is in the balance – your investment should be anchored by those reliable staples you know inside out, with just enough room for a few adventurous preparations to keep your palate interested. With this kind of structure for your investments, market corrections feel less like emergencies and more like seasonal changes – natural, expected, and ultimately temporary.

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