Vacuum creates chaos, and chaos creates opportunity. Wars and geopolitical tensions are threats, but they also create openings for disciplined investors. History shows that those who invest wisely after analysing valuations emerge stronger, while those who follow tips, social media noise and herd mentality often suffer losses.

Over the past three years, Pakistan has witnessed a remarkable surge in retail participation. Around 227,000 new accounts were opened as the KSE-100 Index touched euphoric highs near 191,000 points. Pakistan now has approximately 500,000 registered stock market investors — a major milestone. Yet it is often observed that nearly 99% of new investors lose money. Why? Because they lack clarity about what to buy, when to sell and, most importantly, when to hold.

The Pakistan Stock Exchange (PSX) has recently come under pressure. Regional tensions and political uncertainty have amplified volatility. In such environments, outcomes become uncertain and emotions dominate decision-making. The most practical advice during extreme volatility is simple: do nothing. Attempting to time the market during turbulent periods usually leads to unnecessary losses. For new entrants, gradual investment over several days rather than lump-sum deployment may be more prudent.

This is where value investing principles become essential. Warren Buffett’s philosophy centres on buying quality businesses at reasonable prices and staying calm during turbulence. Influenced by Benjamin Graham but evolving beyond deep discount investing, Buffett emphasises intrinsic value, financial strength, capable management and durable competitive advantages. His timeless quotes remain relevant: “Price is what you pay. Value is what you get,” and “Be fearful when others are greedy and greedy when others are fearful.”

Market corrections are not disasters; they are breathing spaces. Stocks go on sale when fear dominates. Emotional investors panic, while long-term investors find opportunity. Buffett welcomes declines because they allow him to accumulate strong businesses at attractive valuations. His approach is straightforward: stay calm, think long term, avoid timing the market, keep cash ready and focus on business fundamentals rather than stock price movements. Volatility is not risk — overpaying is risk.

Similarly, Charlie Munger emphasised wisdom, patience and rational decision-making. His mindset encourages continuous learning and avoiding stupidity rather than chasing brilliance.

Recently, the KSE-100 experienced one of its sharpest single-day declines after touching historic highs. Analysts quickly blamed foreign selling. Over the past six weeks, foreign corporates sold approximately $130 million worth of equities. However, domestic mutual funds absorbed roughly $140 million, indicating that liquidity did not disappear — it merely shifted hands. Foreign investors typically reduce exposure when US interest rates rise, political stability appears uncertain or when target returns are achieved. This time, it appears to be a combination of these factors.

Additional concerns include Barrick’s security review of the Reko Diq project, global trade developments, political uncertainty, health concerns of key political figures and pre-election balance-of-payments anxieties. Earnings from some heavyweight companies have not fully supported the rapid price appreciation, and long-term price-to-earnings ratios reached 8–9 times relatively quickly. Much of the rally was driven by liquidity-fuelled re-rating rather than strong earnings growth.

However, corrections of 7–15% are historically common even during strong bull markets. Globally, the S&P 500 corrects almost every year without necessarily entering a prolonged bear market. The difference between a correction and a collapse lies in macroeconomic fundamentals.

Dr Zeeshan KhanThe writer is a personal finance and financial literacy enthusiast with an investing experience in financial markets.

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