In the last quarter, the world as well as the markets have gone through a geopolitical roller-coaster ride following the escalation between the US, Israel, and Iran. The destruction and loss of innocent lives is unfortunate, and that is all we can say; anything more is beyond the scope of this letter.
There are likely to be some macroeconomic implications from this in the coming months. However, when it comes to predicting macroeconomic trends with respect to investing, we are 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 towards 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 knows.
This is where the title of Howard Marks’ memo from 2001 becomes insightful:
“You Can’t Predict. You Can Prepare.”
At Decadal, we constantly think about how capital can be best allocated. Should we invest now during the correction, or would it be wiser to wait for a further decline? If we 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 the present stage of Decadal, 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 more or less worked, reinforcing the behavior. 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 appear later.
So how do we at Decadal approach this problem?
At Decadal, we have come to realize that there is no single correct way to deal with this problem, since we are ultimately dealing with an uncertain future. However, one must learn to understand the relationship between market behavior and capital deployment. The key lies in understanding market extremes. History teaches us a great deal, and it is only through history 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 is called a bear market, and 30% or more is often referred to as 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 changes considerably 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, market 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.
This being the case, Decadal has always tried to address this rationally. One of the key learnings from this experience is the necessity of having liquidity at all times, preferably without debt, which simply means having enough dry powder. People often describe cash as a low-return position, but the optionality it brings in such situations is beyond words. Mr. Buffett has always kept a considerable portion of his portfolio in cash. Many believe this is because he thinks the market is overvalued, but in reality, it is a wonderful way to preserve optionality. In the present scenario, we are comfortable holding a certain amount of liquidity (although not as much as we would like). In the future, we expect to place even greater emphasis on the optionality that cash provides.
The second insight relates to accumulation frequency, which Decadal has more or less followed correctly from the beginning. We have always tried to accumulate one company at a time, spaced across time and price, taking opportunities to average while remaining within our desired purchase prices. We continue this process until the position becomes meaningful with respect to our conviction and portfolio size. We intend to continue following this approach. By doing this, we may miss many other businesses, but as Mr. Buffett says, we don’t have to swing at every pitch.
Present status of Our portfolio.
Since Decadal began deploying capital seriously only recently, our portfolio is still in the early stages of construction and the investments are yet to fully play out. We are currently primarily invested in the small-cap space. We intend to discuss our positions in greater detail at a later stage.
Our first position, in the insurance sector, was initiated on 1st January 2025 and currently represents 40% of our invested portfolio. As of date, the position has gained 9.8%. We have paused further additions, as we believe that at present prices we are not getting an adequate margin of safety.
Our second position, from the energy sector, was initiated on 16th October 2025 and represents 45% of our invested portfolio. As of date, the position is down 13.97%. We continue to add to this position in tranches.
Our third position, from the chemical industry, was initiated more recently on 16th March 2026 and represents 15% of the invested portfolio. The position is currently down 3.42% as of date.
Overall, at the portfolio level, we are down 2.77%. Given the volatility and uncertainty in the current market environment, and considering that we are still in the early stages of accumulation, we consider this outcome reasonable.
We wish to write more about our investments and investment thesis in the coming letters.
At Decadal, as the name suggests, we believe meaningful outcomes takes time and we pursue everyday to learn something new and to refine our decision making.
Note: DECADAL. is not a SEBI-registered investment advisor. The content on this site represents personal views and is not investment advice.
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