Share Market is something which is always talked about by Investors. People at large still looks at this investment avenue as a source of income creation rather than wealth creation. Now a days, when we read and hear about Sensex, we get to know that Sensex is going up, making new highs every day etc. At this moment, there are different reactions by different set of investors.
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Since we deal with investors day and night, let us share their views:
Category 1: Investors who are sitting on losses as they invested only when the markets were booming at 20-21000
These set of investors are the most anxious one. They seem to be waiting to recover their losses as soon as possible and then get out of share market. These set of investors are those who entered with greed to make quick money when the markets were going up and then got caught in bear market, did not invest anything when the markets were down, never believed on SIP and are now blabbering “ab mere paise barabar aa gaye ab, nikal leta hoon aur dobara share market me nivesh kabhi nahi karoonga”.
These set of investors will never make money in stock market as the they work with no strategy, they just bank on their fate/luck & love following market fancy.
Category 2: Investors who are having some amount of profits and are now thinking to exit markets:
These investors can again be sub-divided into two types.
a) One who had invested in late 2006 or early 2007, got panicked in 2008 and did not invest during bear market and are now looking to exit. These investors also believe that they will not return to market as it is risky here.
Now here we would like to make a point that many of the investors in category 1 and 2(a), will return to the markets when they will again see their friends, neighbors, colleagues etc making money in stock market. They will never benefit out of share market in real sense.
b)Another type are those who do believe that it is possible to make money out of share market but believe on TIMING OF MARKET rather than giving TIME IN THE MARKET. For these set of investors, it is my sincere advise that do read about WARREN BUFFET, PETER LYNCH and many more great investors who have accumulated wealth by staying invested for long time. They always believed as long as Economy is doing well and the business in which they have invested is doing well, they will remain invested. Short term price movements don’t really bother them.
Now those who believe in timing of the market, let us tell you that even the best fund managers who manages thousands of crore of money and have in depth knowledge of market do not time the market. They have created wealth for investors by investing in quality businesses and not by making use of market movements.
To give you few examples, WIPRO is a well traded stock and lakhs of shares of this companies are bought and sold in BSE/NSE terminals everyday. But if you would invested Rs. 10000/- in WIPRO, in 1980 today its worth in over 450 crores. Can anyone make more money by trading this stock. Even Sensex in the same period gave return of over +17% compounded annually.
Market timing requires two perfect things: one WITHDRAWING HIGH and another INVESTING LOW. If we make mistake in any of the one, the cost of mistake is huge.
Category 3: Investors who believe in Equities as Long Term Investments and believe in Indian Businesses:
They are the one who make the best use of their investment. They believe that business is a long term investment, they believe that equity has consistently outperformed all other asset classes in long run and works well against rising inflation. They believe that share market is volatile in short run but has the potential to create immense and stable wealth in long run. They believe that their long term financial goals can be met by Equities and not by investing in Debt which does not beat inflation in long run.
Now to validate their views, please check the 2 tables.
Table 1
Table 2
Read these articles – I wrote these articles in August 2013, when Sensex was at 18500 & Investors were really concerned
3 Principles & 3 Practices to Generate Superior Life Time Returns
Indian Equities – Past, Present & Future
A dumbo (but still smart) investor who started his SIP when sensex touched 21000 in Jan 2008 – he generated +11% returns in this period, much better than any other financial product.
There is no short cut to success and we all know it but why should people think of making money in short run! So you decide what you should do!!
Nice article! That’s true Heamnt and the reason is lack of awareness. People do not see their investment as long term project or wealth creation project. They panic in short term and exit either with loss or negligible benefit.
~Samir
Hi Samir,
I completely agree with you last line & there is an awesome message in that. I have seen most of people repeating this mistake & then blaming market 3:)
Nice article.
Thanks Rajiv
To create wealth the strategies are very very simple. But, do the so called investors have the dicipline to follow them.
1. Start early
2. Invest egularly
3. Have a Goal on paper
4. Check your portfolio periodically (Not DAILY).
Are these rules not simple, yet even I find them very difficult to follow them. So, i kept them pasted by my bedside, so i don’t forget them.
Simple things are very complicated to follow, be it money or life.
Say truth always, help each other and be kind… now, how many can follow these very very simple rules.
Dicipline leads man to heights which nothing can in life.
Sunil.
SUPER SUGGESTION
Hi Sunil,
Having written goals & some investment rules that investor will follow – will definitely help. Thanks for sharing that you have pasted this on your bedside 😎
Dear hemant,
Of course there is no short cut to success.
This quote from warren buffett says it all ” you cant produce a baby in one month by making nine women pregnent”.
But for longterm investors who has been regularly investing for last 4-5 yrs, it makes sense to book some profits irrespective of election outcome.
There is no relation between your goals & election so I can’t agree with you. O_o
Hi Hemant,
Nicely put forward.
Small correction needed, please see below:
Read these articles – I wrote these articles in August 2014, when Sensex was at 18500 & Investors were really concerned…
August 2014??
Thanks,
Manish.
Thanks – done.
Hi Hemant
I have booked some profit in funds where I had made lumpsum investments. My SIPs are still continuing.
Dear Anil Ji,
Hope you are doing fine.
You must have your reasons for profit booking but most of younger clients I don’t find any reason to look at market & book profits. Asset allocation and rebalancing is better way to regularly book some profit & reduce risk.
Great article Hemant.
I would like to add an old saying of the farmers here. “If a crop is damaged this year or by any means over production makes it unprofitable it doesn’t mean that next year the production will be low or prices will be unprofitable”.
Persistence bears the fruits. Keep your faith on what you are doing or where you are investing. There is a link on alphaideas.in by Prashant – Sell in may and go away , I say – No way.
Perfect example Amitesh <3
Hi Hemant and Anil Kumar Kapila.
Nice to see you again with a article in perfect rime when investors are looking to book some profit. Even i am in some doubt. I am regularly investing in some funds through SIP from last 4 years. My doubt is should i book some profit at this level or not? Al tough i am regular investor through SIP and looking to continue for long time.
Kawardeep – good to know that you are running your SIPs from last 4 years – I will suggest you to read about asset allocation.
1.Does rebalancing of portfolio means book the profits in equity , continue sip and put booked profits it in debt. If so , does it help in building wealth over long term say 30 yrs.
2.Some of the sip started in 5 star mf , 5 yr ago have become 2 star now , and definitely its time to stop sip in them. How should one go about in reinvesting the accumulated corpus into well performing current 5 star rated funds. Accumulated corpus is around 5 lacs – STP is not possible as fund house is different. SWP into bank account and reinvesting via new sip seems to be tedious to be done every 3 years or so. KINDLY SUGGEST
Hi Sandeep,
Yes, asset allocation will work & help in creating wealth in long term.
Regarding second point star rating cannot be the only criteria to invest in any fund….
The stock market is moving up because of political reasons. It is better time to book profit and come out of the market to watch.
Hi Jayakumar,
What will happen if market hits upper circuit on result day?? Are you ready for that scenario??
Booking profits based on market condition only applies to equity investment. As far as mutual funds are concerned, you should continue your SIP regardless of market conditions. Else the very logic of SIP which is rupee cost averaging goes for toss.
Hi Hemant,
Indeed a great read. My husband is totally against Equity investments as he finds it too risky for a middle class investor. This article clears a lot of queries.
Thanks
Nishi
Hi Nishi,
My suggestion is start with whatever small amount that you can think of – you can’t think of ignoring equity in high inflation country like India. 😐
Mr. Beniwal,
Thanks for the article.I am an investor of stock market since 2007. Thanks to God I have not lost money here though I was quite un experienced at that time. Presently I have given attention to mutual funds.I prefer to invest through Sip. I am investing in three funds i.e Uti Opportunities,Idfc Premier Equity and ICICI U.S. equity. For the first two funds my target is to take redemption value as soon as the p/e ratio of sensex will touch 24 or 25.But for the third one I can not predict such.I request you to inform me wheather my plan is correct or not,I also reuest you to give me the target of the third one.I am an Insurance agent of 44 years old.Thanking you-
Manojit Nanda.
Manojit,
We cannot give you any target for any specific fund. In our view your investments should allign with your goals and a long term approach should be taken while investing in equity.
Hi Hemant sir,
I dont know much about stock market and equity fund,but i want to invest some money in both ,what should i do to invest in stock market. and which company equity fund is best to invest.Plz sugest me…
Thanks
SP Bhatt,
If you are not well aware with equity market then mutual funds is the most ideal route since direct equity requires a great amount of expertise. Even within mutual funds you can start with balanced funds which have a judicious mix of equity and debt. You can add more categories later when you are comfortable with investing here.
I am 56 year age. Iam investing in Mutual Funds of equity catogery only.I am retiring after 4 years.now when and how much percentage I should shift in debt/arbitage or any other Mutual Funds for my retirement planning.should I continue to invest in equity Mutual fund through sip or not. Please suggest
Dear Mr Lalit,
It will be better to consult an advisor.. you can read this article that I shared today https://www.retirewise.in/low-risk-high-return-investment/
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