In the last quarter, the world as well as the markets have gone through a geopolitical roller-coaster following the escalation between the US, Israel, and Iran. The destruction and loss of innocent lives are unfortunate, and that is all I can say; anything more is beyond the scope of this letter.
There are likely to be some macroeconomic implications in the coming months. However, when it comes to predicting macroeconomic trends with respect to investing, I am reminded of the famous words of Peter Lynch:
“If you spend 13 minutes a year on economics, you’ve wasted 10 minutes.”
This may seem to suggest that one should be apathetic toward macroeconomics, but Mr. Lynch’s real point is that while it would be highly rewarding to know how things will pan out, no one really does.
This is where the title of Howard Marks’ memo from 2001 becomes insightful:
“You Can’t Predict. You Can Prepare.”
As an investor, I constantly think about how my capital can be best allocated. Should I invest now during the correction, or would it be wiser to wait for a further decline? If I choose to invest now, should capital be deployed all at once or in tranches? And if in tranches, should deployment be spaced based on time, market corrections, or a combination of both?
These are not questions about what to buy or at what price to buy. Rather, they are broader questions about capital allocation and how to achieve the best possible outcomes while managing risk. The fact that capital is a limited resource—at least at my present stage as an investor—makes these questions all the more important.
Investors with limited capital, particularly after a prolonged bull market, tend to buy every dip expecting a quick reversal. In recent times in the Indian markets, this strategy has largely worked, reinforcing this behaviour. However, during extended corrections—the kind many new investors have not experienced since 2020—investors often deploy capital too early and exhaust their reserves, leaving them unable to act when truly attractive opportunities emerge later.
So how do I approach this problem?
I have come to realise that there is no single correct way to deal with it, since we are ultimately operating in an uncertain future. However, one must understand the relationship between market behaviour and capital deployment. The key lies in understanding market extremes. History teaches us a great deal, and it is only through studying it that one can learn to navigate such environments.
Markets decline in different magnitudes. A decline of 10% or more is generally termed a correction, 20% or more a bear market, and 30% or more a crash. Nowadays, even a 3% decline is sometimes called a crash. But this tells only half the story. What really matters is understanding what causes these declines—more specifically, the emotional states of investors that lead to them.
The emotional state of the market evolves over time—from euphoria, to buy-the-dip optimism, to boredom, to fear, to panic, to capitulation, to a market bottom, and eventually to apathy toward equities. Not every correction goes through all these stages; reversals can happen at any point, which makes capital allocation decisions difficult. Moreover, corrections do not occur only through price declines—they can also occur through time, where markets move sideways for extended periods. This makes the process even more challenging for investors deploying limited capital.
Markets often decline sharply (capitulation) not just because investors give up emotionally, but because they are forced to sell due to margin calls, job losses, debt repayments, or other liquidity pressures. Real market bottoms are often formed not when investors want to sell, but when they have no choice but to sell. These situations typically arise when investors are exhausted—financially, emotionally, or both.
Given this, I have tried to approach the problem rationally. One of the key learnings has been the necessity of maintaining liquidity at all times, preferably without debt—simply put, having enough dry powder. Cash is often viewed as a low-return position, but the optionality it provides in such situations is invaluable. Warren Buffett has always maintained a meaningful portion of his portfolio in cash. While many interpret this as a view on market valuations, it is also a way to preserve optionality.
In the present scenario, I am comfortable holding a certain level of liquidity (although not as much as I would like). Going forward, I expect to place even greater emphasis on the optionality that cash provides.
The second insight relates to accumulation frequency, which I believe I have broadly followed correctly from the beginning. I have focused on accumulating one company at a time, spaced across time and price, taking opportunities to average while remaining within my desired purchase range. I continue this process until a position becomes meaningful relative to my conviction and portfolio size.
I intend to maintain this approach. While this may result in missing other opportunities, as Mr. Buffett says, I do not have to swing at every pitch.
Present Status of My Portfolio
Since I began deploying capital seriously only recently, my portfolio is still in the early stages of construction, and the investments are yet to fully play out. I am currently primarily invested in the small-cap space and intend to discuss my positions in greater detail in future letters.
My first position, in the insurance sector, was initiated on 1 January 2025 and currently represents 40% of my invested portfolio. As of the date of writing, the position has gained 9.8%. I have paused further additions, as I believe current prices do not offer an adequate margin of safety.
My second position, in the energy sector, was initiated on 16 October 2025 and represents 45% of my invested portfolio. As of the date of writing, the position is down 13.97%. I continue to add to this position in tranches.
My third position, in the chemical industry, was initiated on 16 March 2026 and represents 15% of my invested portfolio. The position is currently down 3.42% as of the date of writing.
Overall, at the portfolio level, I am down 2.77%. Given the volatility and uncertainty in the current market environment, and considering that I am still in the early stages of accumulation, I consider this outcome reasonable.
I intend to write more about my investments and the underlying investment thesis in future letters.
At Decadal, as the name suggests, I believe meaningful outcomes take time. My objective is to continue learning, improving and refining my decision-making over the decades ahead.
Disclaimer: Decadal is a personal investing journal. The views expressed here reflect my own opinions and are intended solely for educational and informational purposes. Nothing published here should be construed as investment advice or as a recommendation to buy or sell any security. I am not a SEBI-registered investment adviser.
Leave a Reply