There’s no shortage of investors trying to guess the market bottom. Fortunately, it’s completely irrelevant to delivering exceptional returns through this crisis.

We’d all love to know when the market bottoms. We’d be able to load up on risk assets and see nothing but immediate gains. But successful investing doesn’t work that way. No one consistently calls the bottom. Some get lucky once or twice, but never in a systematic way. Mostly luck, not skill.

You’ll always be too early or too late. You won’t know the bottom until you look back with hindsight years later. So if you shouldn’t be timing the bottom, what should you be doing?

Stop trying to call the bottom and start trying to find value.

When I say find value, I simply mean finding securities trading at significant discounts to fair value.  It can be due to any number of factors: forced selling, illiquidity, herd mentality, bad news, etc. It crosses all style boxes and asset classes. The more value you can put in your portfolio, the better your returns.

Your sole purpose is to identify as many securities or asset classes that are trading at significant discounts to fair value. Unlike speculating about the bottom, buying mispriced assets actually sets you up for outsized returns.

And there’s even more good news.

This is not an exact science. You don’t need to compute out to several decimal points. You only need to establish a wide enough margin of safety to ensure you’ll win over time and across a diversified portfolio.

For example, if a stock normally trades at 20x earnings, and it’s currently trading at 19x earnings, it’s not significantly mispriced. But if that same equity is trading at 10x earnings, you don’t need an excel model to know that you’re set up for compelling future returns. Not guaranteed, but the odds are stacked in your favor.

Repeat this process and you’ll have a portfolio full of opportunities. Even better, if you can find uncorrelated ideas across asset classes, you’ll have an undervalued, diversified portfolio with less risk. The exact outcome you want in today’s environment.

This is why it’s important not to worry about timing the bottom. It’s not necessary. Even if you bought in too early at 15x or 12x earnings, your eventual return would be 33% or 66% when it returned to fair value. Not bad in either case. But in both cases, you’d have to maintain conviction in your ideas and be comfortable with temporary losses.

Position sizing and predetermined buying levels are critical tools to average into positions. It’s a lot of pressure to know when to go “all in” on a security. So don’t try to go all in at once. Instead, set up predetermined buying levels that pre-commit you to buy a certain amount at various valuation levels. In the example above, you may buy 1/3 of your maximum position at 17.5x, another 1/3 at 15x, and the final 1/3 at 12.5x earnings. It’s a disciplined, unemotional way to average in during a crisis. No more waiting to time the bottom. No more waiting for the perfect moment. You’ll be early, but it’s a disciplined way to build exposure systematically, rather than emotionally.

It’s this “being early” part of the process that drives investors crazy. It’s what makes the execution of this strategy so hard. But you have to overcome it.  Many investors can’t deal with that short-term pain, even if it delivers significant double-digit returns over time. Idea generation and security analysis is necessary, but not sufficient, to deliver high returns. You need the emotional strength to get through the early losses.

Investors that try to time the bottom simply lack courage. They can’t handle being wrong. They can’t handle losses. They can’t handle uncertainty. They can’t handle client pushback. It’s easier to go with the trend because it’s the path of least resistance to do nothing during uncertain times. Now investors, consultants, and managers won’t admit this. They’ll frame this as “risk control”, “waiting for the right opportunity”, “waiting for more clarity”, “monitoring the environment”, etc. They act as if the markets are going to give them a heads up so they can buy before the recovery. That never happens. The markets will rebound long before there is clarity and predictability. You don’t deliver exceptional returns by investing when markets are back to normal.

To reiterate, you don’t need to time every purchase at the bottom to deliver spectacular investment returns. Many investors don’t get this. You don’t need perfection. You need to be leaning in the right direction and put money to work when risk premiums are sufficiently wide.

Simple, but not easy.

Timing the bottom makes for a lively discussion on CNBC, but won’t grow your portfolio’s value.