Many argue this time it\u2019s different but history has shown us that markets reverse to match earnings growth rate. As markets have run ahead, it\u2019s pretty clear the near term returns are going to be lower than the earnings growth rate. Given earnings growth rate would be in the range of 13-14% CAGR, markets returns could be lower than 8-9% over next\u00a03 years.<\/p>\n
This could probably be the worst time to invest in the market. One may argue not to sell out the already invested amount because timing doesn\u2019t work. But it\u2019s certainly a bad time for entering the market since expected returns are likely to be lower. Call it a coincidence, SIPs and retail participation has increased exactly in the recent times. Or is it because investors are victim of recency bias?<\/em><\/p>\n Many investors who had not invested a dime, or had a very small amount into equities, have started investing heavily into equities NOW. Most of them may feel cheated in near future. Add to it the market volatility which could lead to temporary loss on their capital that would lead to more disappointment. This sudden spurt in risk taking ability could definitely lead to a sad ending.<\/p>\n Dear reader, if your appetite for risk has increased off late, we would suggest you to be risk averse in these times. Yes you will miss near term returns but the real risk of market correction is still pretty much there.<\/em><\/p>\n It\u2019s the time to hold on to your savings and be selectively into equities. Say if you wish to invest Rs. 10,000\/month in equities, just invest 3,000-4,000 into equities. Rest can be parked into Liquid Funds or Fixed Deposits. If your invest horizon is well above 10 years, don\u2019t chase high returns or risky products like Small Cap funds. You will get many opportunities in the future.<\/p>\n When markets will correct, don\u2019t check the returns on existing portfolio but start investing as it goes down. Don\u2019t wait for market to hit the bottom. As and when it falls to fair value, you may start allocating 100% into equities and move your existing liquid funds into equities as it corrects more. If you panic during that time, you miss the chance to make 13-15%+ tax-free compounding returns from equities. Our estimate of fair value today is around 8600-8900 on Nifty. As a thumb rule, if the Nifty were to correct below 9,000 over next 6 months<\/strong>, you may start investing into equities. Always buy a basket of stocks across large, mid and small caps. (Our fair value estimates change every six months.)<\/p>\n Now that you are aware of equities, always remember, time to take risk is when markets are cheap. Time to be risk averse is when markets are cheerful.<\/p>\n If you liked what you read and would like to put it in to practice Register at MoneyWorks4me.com<\/a>. You will get amazing FREE features that will enable you to invest in Stocks and Mutual Funds the right way.<\/p>\n Need help on Investing? And more<\/b>\u2026.<\/b>Puchho<\/b> Befikar<\/b><\/span><\/p>\n Kyunki<\/i><\/b> yeh<\/i><\/b> paise<\/i><\/b> ka<\/i><\/b> mamala<\/i><\/b> hai Across years, we have observed that investor’s behaviour changes as per the market sentiment. They turn risk averse when markets are going through a rough patch. On the contrary, they take more risk during the bullish phase. Exactly opposite behaviour is expected while investing in equities. We wonder how investors make same mistakes time and […]<\/p>\n","protected":false},"author":15,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","footnotes":""},"categories":[3],"tags":[],"modified_by":"MoneyWorks4me","_links":{"self":[{"href":"https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-json\/wp\/v2\/posts\/10080"}],"collection":[{"href":"https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-json\/wp\/v2\/users\/15"}],"replies":[{"embeddable":true,"href":"https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-json\/wp\/v2\/comments?post=10080"}],"version-history":[{"count":0,"href":"https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-json\/wp\/v2\/posts\/10080\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-json\/wp\/v2\/media?parent=10080"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-json\/wp\/v2\/categories?post=10080"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-json\/wp\/v2\/tags?post=10080"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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