Your ears are probably swelling from all this talk about a small entry quantum (SEQ) per day.
However, you are also noticing the practical element of the SEQ, especially during the current correction.
Whatever’s happening in the world is happening. We need to long-term invest on the basis of what’s being offered to us. When we see margin of safety, we act.
However, we could go on seeing margin of safety for years upon end. Therefore, our entry quantum per day is small, so small that we can last out purchasing for quite a while, and still have ample liquidity left over for all other necessary aspects of life.
There’s another benefit of the SEQ though.
Let’s say that one of your holding turns rogue.
It can happen. So many scams are emerging. There’s a new scam every day.
So let’s just assume, for assumption’s sake, that the management of one of the stocks you are holding is involved in a fraud, and this fraud has come to light.
Where does that leave you?
You stop accumulation of this stock immediately.
Don’t expunge it yet. You’ll lose out. What if the scam is a hoax? Find out. It might blow over. Management might change. Your conviction in the stock might be rekindled. Wait for a market high. If you’re still not convinced about the stock anymore, expunge it on a market high.
What did the small entry quantum do for you here?
You had accumulated the stock over some kind of period, SEQ by SEQ, right?
When the fraud exploded, your holding wasn’t that sizeable. SEQ, remember.
A fraud management won’t wait multiple years to let their fraudulent natures act. Sooner or later, a fraud will get caught. Sooner the better. When this one is caught, your holding is not enormous. It’s size depends upon the number of years of holding and conviction.
The greater the conviction, the longer the holding and the lesser are the chances of the management consisting of fraudsters.
Your small entry quantum has ensured that over many, many years, stocks that end up getting accumulated majorly are the ones where conviction strengthens year upon year upon seeing multiple practices of good governance and shareholder-friendliness.
Scammers stop getting accumulated long ago. They are expunged on market highs.
After a decade or two, your portfolio is brimming with honest multibaggers.
