New question regarding varnishing stairs and railings

I've put the first varnish (water based) coat on my bare oak stair steps and railing (I didn't put any staining) and like expected, the wood grain made the surface rought. From what I understand, I have two options at this point. I can either sand after this first coat (I have no air bubbles though) or wait until just before the last coat. I have concerned with both methods and would like to see what you guys think.
By sanding right now, I'll make the surface smooth again but I'm afraid the second coat will also make some wood grain rise and therefore I'll have to sand again (I have over 110 ballustrades and it takes quite some time to sand).
By sanding just before the last coat, I'm afraid some bare wood (where the grain was sanded down) will only be protected by this last coat.
Are these concerns valid or am I worrying about nothing?
Thanks.
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I always go ahead with two coats of the water stuff before sanding to build a decent base so to speak. Then sand lightly with some 240 or so grit and give it two more coats, sometimes three, after that. Sometimes though rarely I'll have to sand after the third coat too but most time not.
Jim

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