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Fallacy of Price Anchoring, Should you time the market?, How long will it take to bottom out, and More.

  • Psychology: The fallacy of price anchoring after a bull run
  • Number Talk: The history of market bottoms and rebounds
  • Concepts: The dynamics of timing the market Vs buy-and-hold
  • Personal Finance: How the risk of the unknown affects us?
  • Contra View: Buying the dip strategy may not always work
  • Pop Quiz: A quiz question that can win you a little gift from us

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We summarise long-firm articles into five sentences or less so that you get the maximum value out of your time spent here.

Of course, reading a five-line summary is not as good as reading the whole thing – but hey – it’s much better than not reading the article at all.


When markets seem too easy… 👀

  • To buy when there is blood on the streets is great advice.
  • But do you have the foresight to pick the next Apple or Amazon from all the stocks that are down ~80%?
  • Price Anchoring – Not concentrating on the value of the company’s business but on the drawdown w.r.t recent highs
  • An entire generation of investors grew up seeing the markets go up with rocket emojis.
  • Once the truth is realized, it can’t be unlearned. As a kid, once you find out that Santa isn’t real, you can’t just decide to believe in Santa again. It doesn’t work.

[Read More] – Price Anchoring and Broken Stories

How bad can it get? 🍀

  • The Russia-Ukraine war might have put brakes on the post-Covid global market rally, but the final nail in the coffin came in the form of the Fed and RBI
  • Nifty made its recent high of 18,614 on 19th October and is currently down by exactly -15% as of writing this. How much more will the NIFTY fall?
  • The Nifty has fallen by 15% almost every second year. A common occurrence.
  • After falling 15%, the NIFTY typically falls another 10%
  • After falling 15%, it takes 49 trading days to recover and generate a profit of 5%

[Read More] – Where will the Nifty bottom out?

Should you time this falling market? 🎯

  • “Experts” want us to believe that “time in the market” is much better than timing the market. We trust them because we have failed to catch the tops and bottoms.
  • S&P Data suggests that a half-decent buy strategy aimed at constantly timing the market doesn’t work most of the time. But, it does wonders for the rest of the time.
  • Consistently reacting to market changes and actively managing your positions does seem to pay off in the long term.
  • There’s no fixed formula one must latch on to. The key is in thinking long-term and sticking to a reasonable timing strategy that works.
  • The focus should be on trying to win the big war even if it means losing the small battles.

[Read More] – Right Now, But Wrong Later

(There’s a similar analysis we did on Nifty 50 data on timing the market. If you wish to read it, just reply with a “YES” to this email)

Risk of the unknown 👻

  • The biggest risk, and the one that hurts the most, is always what no one sees coming – Covid, 9/11, Russia Ukraine war.
  • If you’re only saving for the risks you can envision, you’ll be unprepared for the risks you can’t imagine every time.
  • The same goes for how much debt you think you should handle – whatever you think it is, the reality is probably a little less.
  • The same goes for cash – you think you have enough to get by and then inflation hits.
  • It’s like that for everything. It will be like that forever.

[Read More] – Never Saw It Coming

The dip can be deep! 🚀

  • Buy the dip is to buy stocks when they fall because the market always bounces back.
  • It has been a fantastic strategy since 2009 always giving positive returns.
  • Why has this strategy been so profitable and painless? Well, because stocks have been in a bull market for thirteen years.
  • Analyzing the data from the 2000 peak suggests that buying the dip can be a long & painful journey to just breakeven.
  • Sometimes the game changes and we don’t even realize it until it’s too late to adjust our strategy.

[Read More] – When Buying the Dip Doesn’t Work: An Analysis of the Dot-com Crash

Pop Quiz ⚡️

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Question: Way back in and around 1875, a few people gathered under a banyan tree in South Bombay for their business activity and started an association by contributing Rs 1 each. This organization was started by a cotton merchant Premchand Roychand.

Name the organization. (You surely know the answer!) 

Last week’s quiz results💡

Answer: Force Majeure

Quiz Winner – Prempal Singh 🎉

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Fallacy of Price Anchoring, Should you time the market?, How long will it take to bottom out, and More.


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