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 we 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, 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 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.”
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 largely worked, reinforcing this 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 emerge later.
So how do we at Decadal approach this problem?
We have come to realize 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 behavior 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, we 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, we are comfortable holding a certain level of liquidity (although not as much as we would like). Going forward, we expect to place even greater emphasis on the optionality that cash provides.
The second insight relates to accumulation frequency, which we believe we have broadly followed correctly from the beginning. We have focused on accumulating one company at a time, spaced across time and price, taking opportunities to average while remaining within our desired purchase range. We continue this process until the position becomes meaningful relative to our conviction and portfolio size. We intend to maintain this approach. While this may result in missing other opportunities, as Mr. Buffett says, we do not 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 and intend to discuss our positions in greater detail in future letters.
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 current prices do not offer an adequate margin of safety.
Our second position, in 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, in the chemical industry, was initiated 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 intend to write more about our investments and underlying thesis in the coming letters.
At Decadal, as the name suggests, we believe meaningful outcomes take time, and we strive every day to learn, improve, and refine our decision-making.
Note: Decadal is not a SEBI-registered investment advisor. The content presented here reflects personal views and does not constitute investment advice.
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