Do I Buy, Sell, or Hold on a Red Day?

-Nirav Shakya

A simple question indeed, but the answer couldn’t be more complicated.

We learned about variables in high school and if you’d paid attention then, chances are you still remember those Math lessons. Depending on how good you were then could make a huge difference when you answer this simple question.

A stock’s price is like the weather. We have sophisticated techs today to forecast the weather, but how often have we seen them fail? Ever planned a trip because ‘Google’ said there’ll be sunshine and got disappointed the next morning when you got thunderstorms instead? You’re not the only one.

Short term trading or day trading is equivalent to the daily weather forecast - lots of variables and little to no room for error.

Long term trading or investing, the kind that Buffet, Munger, and the likes believe in, can be compared to seasons. Summer means hot sunny days and winter means harsh cold and freezing temperatures. There is a lot more room for error and smaller variables can be ignored.

Of course, it’s not the be-all and end-all of investment. Not by a long chalk. Even seasons are affected by global events. We’ve seen global warming and deforestation and many other events affect our climate to a great extent. Even the latest pandemic, which you’d probably think couldn’t affect the climate has done so in many ways than we can imagine. It’s certainly changed the global economy. Companies that were once worth billions are now bankrupt while companies that were struggling to make ends meet are now valiantly pouring in capital to expand.

And who could have predicted this pandemic only a year ago?

Article by Nirav Shakya

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