Should you be worried about Equity Markets breaching new heights


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.

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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.


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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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Disclaimer : While due precaution has been undertaken in the preparation of this article, The Mutual Fund Guide or any of its authors will not be held liable for any investments based on the above article. The above article should not be considered financial advice and has been published only for your perusal. Due credit has been given in case wherever required, in case you feel any part violates any rights then do get in touch with us and we shall get it duly removed.  
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