Friday, July 23, 2021

Markets near lifetime highs

Many investors try to time the market when we hit an all time high, stopping the ongoing SIPs.

History shows that we can go wrong in timing the market. Time in the market is more important than timing the market. 

This image shows the number of times Nifty made new highs each year. Just because the markets hit new highs doesn’t mean they have to fall. Even if you were to time the market, i.e., sell at the peak and buy at the bottom, you need to be right twice. As much as we humans like to think we’re good at predicting things, we aren’t. And even if you time the market perfectly, you aren’t guaranteed to beat a simple SIP. (Source : Zerodha)

Equtity is good to reach your long term goals and these are 5+ or 10+ years away. It is easy to get carried away by short term market gyrations and stray away from your investment plans and break the discipline. To be successful in investing, we will have to focused and keep emotions at bay.

1) Find your risk score using a risk profiler

2) Create an asset allocation for equity / debt based on the risk score, Eg. 60/40 

3) Rebalance your portfolio of either equity goes beyond 60 or falls below 60, this way you do not fall for emotional bias, at the same time you are protecting profits made and investing when markets are cheaper.

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