Isolated from context, 20 seconds appears to be a fairly unnoticeable, small quantity of time, however, I’m sure we all know people who obsess over time. Each of us would have meet someone who would press 88 on the microwave instead of 90 as it’s more effort efficient. I, myself must confess that I press the “door close” button as soon as I enter an empty elevator in the hope of shaving off the few seconds for which the door remains open. We all belong, then, to the “Need for speed” generation, and carry this mindset with us, into the world of investing.

For instance, we see the NAVs in the papers every morning, and experience either a 5 minute panic or euphoria depending on the market mood despite having invested that money for some requirement that is still 5 years away. Of course, temptation is hard to resist, and curiosity leads me to wonder what would happen if NAVs were declared every one hour rather than at the end of every day. I wonder how many times a day we would be driven to enter and exit funds .
Getting caught in current sentiment, we often lose sight of the bigger picture which is

* Why did we invest the money- ie. what is our investment objective
q What is the time horizon we had put the money away for

The picture is really much bigger than we usually comprehend. The Sensex came into being over 25 years now, and in its time has seen quite a few surges and upsets. To understand the magnitude of events that have altered the course of the sensex, compare the 2 graphs given below. Graph 1 is a month on month record of the movement of the Sensex history into a I week period that we could term a “dream week” were every day in the “dream week” = approximately 1300 days in real time”

As can be seen, not only are the trends clearer, event-led movements such as The Gulf War and the Babri Masjid demolition, or even the two scams that have left a mark on the sensex history in “real time” seem to have no impact on the “dream week”.

The findings then are very clear. The broad market movement is affected by fundamentals, and taking a distant view on the stock market helps us identify these fundamental trends better.

Looking at the markets once every dream day (approximately once every 1300 days of “real time”) helps us identify the macro trends shaping the market, and out consequent investment decisions are therefore determined by these fundamentals and not merely sentiment driven.

This is something that we have often discussed in the pages of the Wise Investor, when we drew differences between an” investor” as against a “speculator”. An investor looks at fundamentals while making investment decisions, while a speculator merely gambles.

Consider this: Investment manager A tells you that he has grown your money doubled your money 5 years, while investment manager B tells you that he has doubled your money in 1 year. Which one would you give your money to? The answer seems too obvious to merit mention. But wait. When asked how, Investment manager A says that he did a lot of research, analyzed macro trends and identified companies that he believed would grow in the future. Investment Manager B on the other hand says “I tossed a coin and won” The decision then is not as simple as it appears to be.

We need to understand that while in the short term easy entries and exists seem to make our money grow, they are in reality not significantly better than tossing a coin. Short term fluctuations are anybody’s guess. If we could develop the patience to wait out these short term fluctuations, we would succeed in making our “real wealth” grow.