Whenever the equity markets hit a new high, it brings along
with it a unique set of challenges for investors.
Often many of these challenges are self-inflicted and easily
avoidable, humans are anything but simple though.
Investors tend to grapple with fearing a market crash to
pondering over an exit with the intent to re-enter the markets at an imaginary
low.
Such scenarios have their origin in the belief that making
money in the market means buying low and selling high, a very easy method to
spot a trader in the garb of an investor.
If you are a long term investor but at the same time if your
opinion and beliefs can be swayed easily by market movements then maybe you
are not one but how does one wake up someone pretending to be asleep but not
asleep?
Equity Investing is simple but not easy, the inability to
discern between the two and the urge to reinvent the wheel often leads one in a
soup.
Does not matter if you are goal oriented
Let’s say you have a long term goal like retirement which is
more than 15 years away.
In such a scenario, how does it matter if the markets have
hit new highs today?
It does not, your concern is not valid at all.
The same is the case if the markets were under- performing
too.
If you are a long term investor with a goal oriented
portfolio (which should be the case ideally) then it should not matter to you
how the markets are doing currently.
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Difference between High valuation and Market highs
Markets hitting record highs and a market with high
valuation are not the same.
The major market indicators in India are Sensex and Nifty.
If the companies that form the two indexes are fairly valued
and if they as a whole hit record highs, then that does not imply the markets are
overvalued.
An overvalued market would imply the true picture is not as
rosy as the numbers would suggest.
The same cannot be said when the markets hit record highs.
Perspective
Let’s look at the growth of Sensex to better understand how
perspectives and narratives work.
The sensex has breached the 20k, 30k, 40k and so on for the
first time at some point.
At each point the cynics would be out claiming the markets
are overvalued.
High valuations and new market highs are not the same and
when the economy grows it is only natural for the market forces to reflect the
same.
In fact it should be a matter of concern if they are not.
An easy way to understand this much better is to read up on
the economic growth of a country, if a country is growing then it is only
natural for the market indexes to also reflect the same.
This is more so the case with developing countries because
the scope for growth is more as compared to a developed country.
It is always a good time to invest in equities as long as
you have a long term goal and intend to stay put all the way.
One can always put forth different ideas with regards to the
method of investing, that is either in one go or in smaller chunks
periodically.
Investing in equities is not about when you buy and sell,
it’s whether you can hold when things look bleak.
It takes no courage to call oneself a long term investor
with a high risk appetite when things are rosy.
In equity investing, the less you do the more the chances of your success and that does not come naturally for most.
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