Riya: Shyam, did you see what happened to the Banking stocks yesterday? They were up one day and crashing the next! I’m really stressed out. What’s going on?
Shyam: I saw that, Riya. It’s what we call a tariff tantrum. At first, people thought the Banking sector would be safe from the trade tariffs. So the stocks jumped. But the very next day, news came out saying the opposite—and boom, they fell.
Riya: So should I be selling my investments now?
Shyam: Not so fast.
Riya:But this feels like 2018 all over again.When there was impact on the Chinese stocks?
Shyam: Exactly. Stocks did take a hit. But did businesses stop growing? No. Earnings, cash flow, and long-term performance continued just fine. Markets react emotionally, but businesses move at their own pace.
Riya: Still, this volatility is scary. Isn’t it risky?
Shyam: Riya, volatility isn’t the real risk. The real risks are:
- Losing your capital permanently.
- Chasing hot, trendy stocks without knowing the risks.
- Paying too much for a good company.
That’s why I always suggest staying conservative and sticking to strong fundamentals.
Riya: So… what should I do when the market behaves like this?
Shyam:Ask yourself a few simple questions:
- Has the company’s product become less useful?
- Has their cost structure changed badly?
- Or is it just short-term politics or fear?
If it’s the last one, it’s not a reason to panic.
Riya: Okay, but what kind of companies survive these shocks better?
Shyam:The strong ones.
Businesses with:
- Pricing power
- Durable moats
- High return on capital
- And steady cash flow
They handle storms better—and sometimes, when prices fall, those are the ones to even buy more of.
Riya: Hmm. So I should look at the long term?
Shyam: Exactly.
Philip Fisher said “The stock market is filled with individuals who know the price of everything, but the value of nothing.”— Value investing is about substance, not just price.
In other words, stock prices can swing wildly due to news or opinions. But over time, what really matters is the actual weight of the business—its earnings, value, and performance.
Riya:Makes sense. But can you give me a real-life example?
Shyam: Sure! Think about your favorite restaurant in town. One day, someone spreads a rumor that it’s shutting down. The crowd disappears. The next day, the owner clears the air—it was just a rumor. People return.
Did the taste of the food change? No. Did the service drop? No. It was just a temporary scare. That’s how the market works too.
Riya:That really helps, Shyam. I think I was getting carried away by the panic.
Shyam: It happens to the best of us. Just remember—stay calm, think long term, and stick to strong companies. The storm will pass away.
Simplified Money Talks 