Conviction in Investing

Happy New Year to DSIJ Team! Your cover story titled ‘Where to invest in 2022’ in the recent issue was an excellent read. In the story, you mentioned that micro-cap and small-cap investing is built around ‘3Cs’ – conviction, courage and concentration. Why does conviction matter in investing? As a retail investor, how should one gain conviction in a stock and hold on to it?

- Anmol Shah 

Editor Responds: Happy New Year to you too! We are pleased to hear that you found our cover story productive and helpful. The concept of conviction in investing is a widely held virtue, especially in the small-cap investing world. Conviction in investing materializes and develops over time as investors delve deep to understand the business model, products or services, growth drivers, industry environment, future prospects, and corporate governance of a highquality company with strong fundamentals. Conviction is paramount because investors, who lack conviction, are unable to endure market volatility, make futile efforts to time the markets, and tend to sell their investments during corrections or bear phases. On the contrary, investors with high conviction tend to hold onto their picks for the long term, which will ultimately help them leverage the power of compounding and earn superior returns. Hope this helps. Keep writing to us. Happy investing!