The correction obsession
July 05, 2025
Editor's Note
Dhirendra Kumar’s insights and timeless advice for investors
4Every Saturday, I share insights on a topic that investors will find useful. This week, I discuss why perfect timing ruins real returns.
The correction obsession
Howard Marks, whose investment memos I’ve referenced in previous columns and remain a personal favourite, once wrote something particularly illuminating about market timing in his book “The Most Important Thing.” He described day traders who considered themselves successful after buying a stock at 10 and selling it at 11, then buying it back at 24 and selling it at 25, and finally buying it again at 39 and selling it at 40. As Mark dryly observed, if you can’t see the flaw in making three dollars on a stock that appreciated by thirty, you probably shouldn’t be investing at all.
This perfectly captures what I call “correction obsession”-the counterproductive fixation on timing market entries and exits rather than simply staying invested. It’s become one of the most pervasive mistakes in Indian equity investing, turning what should be a straightforward wealth-building exercise into an elaborate game of financial musical chairs.
The correction obsession manifests in several predictable ways. There’s the perpetual waiter syndrome, where investors keep cash on the sidelines indefinitely, always expecting a better entry point after the next correction. These investors miss years of potential returns while waiting for a ten or twenty per cent decline that may or may not materialise. They’ve convinced themselves that patience means waiting for the perfect moment rather than understanding that time in the market trumps timing the market.
Then there’s the correction predictor fallacy, where people spend enormous mental energy trying to forecast when corrections will happen. They pore over technical charts, follow expert predictions, and study historical patterns that don’t repeat with any reliability. It’s astrology dressed up in financial terminology, complete with the same tendency to remember the hits and forget the misses.
Perhaps most damaging is the timing trap that ensnares even those who successfully identify a correction. They wait for the decline, but then struggle with when to deploy their cash during the downturn. They end up waiting for the “bottom” and miss the recovery entirely. This obsession stems from a fundamental misunderstanding of what corrections are. They’re not precise, predictable events that follow some grand schedule. They’re simply the normal, random volatility that’s inherent in equity markets. Treating every five- or ten-per-cent decline as a special “buying opportunity” misses the point entirely – the real opportunity is to invest consistently through all market conditions.
What makes this particularly frustrating is how the correction obsession feeds on itself. Every small decline validates the obsession, “See, I was right to wait!” while ignoring the much larger gains foregone. It’s confirmation bias wrapped in the illusion of sophisticated market timing.
The irony is that corrections, when they do come, often feel nothing like the buying opportunities that investors imagined. During actual market stress, the same people who claimed to be waiting for cheaper prices suddenly find reasons to wait for even cheaper prices. Fear replaces greed as the dominant emotion, and the correction they’d been anticipating transforms into a reason for further delay.
This points to a deeper problem in Indian investing culture, where there’s often more discussion about when to invest than what to invest in or how long to stay invested. We’ve created a narrative where successful investing requires perfect timing rather than patience and discipline. It’s as if we’ve convinced ourselves that the secret to wealth creation lies in being cleverer than the market rather than simply participating in its long-term growth.
The cure for the correction obsession is simple: start investing with whatever money you have, when you have it, and keep adding regularly regardless of market conditions. This approach won’t generate exciting stories about perfect timing, but it will generate wealth. Sometimes, the most boring strategy is also the most effective one.
As Howard Marks might say, the real success isn’t in capturing every rupee of market movement – it’s in capturing most of the long-term returns whilst everyone else is busy trying to be too clever.
Thank you for being a Value Research Insider. I hope you found this note useful and interesting. What did you think of today’s note? Let me know.
And if you need some extra help to improve your investments, you can check out Fund Advisor and Stock Advisor. Many readers find these to be valuable companions on their investing journey.
If you know anyone who would enjoy it, please forward this email. They can sign up for free here.
You can also subscribe to the Hindi version of this note here.
Editor's Note
Dhirendra Kumar’s insights and timeless advice for investors
4Every Saturday, I share insights on a topic that investors will find useful. This week, I discuss why perfect timing ruins real returns.
The correction obsession
Howard Marks, whose investment memos I’ve referenced in previous columns and remain a personal favourite, once wrote something particularly illuminating about market timing in his book “The Most Important Thing.” He described day traders who considered themselves successful after buying a stock at 10 and selling it at 11, then buying it back at 24 and selling it at 25, and finally buying it again at 39 and selling it at 40. As Mark dryly observed, if you can’t see the flaw in making three dollars on a stock that appreciated by thirty, you probably shouldn’t be investing at all.
This perfectly captures what I call “correction obsession”-the counterproductive fixation on timing market entries and exits rather than simply staying invested. It’s become one of the most pervasive mistakes in Indian equity investing, turning what should be a straightforward wealth-building exercise into an elaborate game of financial musical chairs.
The correction obsession manifests in several predictable ways. There’s the perpetual waiter syndrome, where investors keep cash on the sidelines indefinitely, always expecting a better entry point after the next correction. These investors miss years of potential returns while waiting for a ten or twenty per cent decline that may or may not materialise. They’ve convinced themselves that patience means waiting for the perfect moment rather than understanding that time in the market trumps timing the market.
Then there’s the correction predictor fallacy, where people spend enormous mental energy trying to forecast when corrections will happen. They pore over technical charts, follow expert predictions, and study historical patterns that don’t repeat with any reliability. It’s astrology dressed up in financial terminology, complete with the same tendency to remember the hits and forget the misses.
Perhaps most damaging is the timing trap that ensnares even those who successfully identify a correction. They wait for the decline, but then struggle with when to deploy their cash during the downturn. They end up waiting for the “bottom” and miss the recovery entirely. This obsession stems from a fundamental misunderstanding of what corrections are. They’re not precise, predictable events that follow some grand schedule. They’re simply the normal, random volatility that’s inherent in equity markets. Treating every five- or ten-per-cent decline as a special “buying opportunity” misses the point entirely – the real opportunity is to invest consistently through all market conditions.
What makes this particularly frustrating is how the correction obsession feeds on itself. Every small decline validates the obsession, “See, I was right to wait!” while ignoring the much larger gains foregone. It’s confirmation bias wrapped in the illusion of sophisticated market timing.
The irony is that corrections, when they do come, often feel nothing like the buying opportunities that investors imagined. During actual market stress, the same people who claimed to be waiting for cheaper prices suddenly find reasons to wait for even cheaper prices. Fear replaces greed as the dominant emotion, and the correction they’d been anticipating transforms into a reason for further delay.
This points to a deeper problem in Indian investing culture, where there’s often more discussion about when to invest than what to invest in or how long to stay invested. We’ve created a narrative where successful investing requires perfect timing rather than patience and discipline. It’s as if we’ve convinced ourselves that the secret to wealth creation lies in being cleverer than the market rather than simply participating in its long-term growth.
The cure for the correction obsession is simple: start investing with whatever money you have, when you have it, and keep adding regularly regardless of market conditions. This approach won’t generate exciting stories about perfect timing, but it will generate wealth. Sometimes, the most boring strategy is also the most effective one.
As Howard Marks might say, the real success isn’t in capturing every rupee of market movement – it’s in capturing most of the long-term returns whilst everyone else is busy trying to be too clever.
Thank you for being a Value Research Insider. I hope you found this note useful and interesting. What did you think of today’s note? Let me know.
And if you need some extra help to improve your investments, you can check out Fund Advisor and Stock Advisor. Many readers find these to be valuable companions on their investing journey.
If you know anyone who would enjoy it, please forward this email. They can sign up for free here.
You can also subscribe to the Hindi version of this note here.
Comments
Post a Comment