Running an advisory
for the last year and a half, I have had the opportunity to interact with a lot
of investors. One question that keeps cropping up from time to time and has
increased in the last few days is, “The markets are at an all-time-high, should
I invest now or wait for it to fall?”
Here is what I
usually tell them:
One of the biggest mistakes we make is looking at the market
through a short term lens when we are trying to invest for the long term. We
say we want to invest for the long term, implying atleast five to ten years but
keep looking at the markets on a day to day basis.
Two main drivers – FOBI & FOMO
Investors are driven by two primary thoughts – i) the fear
of loss (FOBI – fear of being invested) and ii) fear of missing out
When markets are falling people are scared about losing
money in their investments. They try to look the other way or panic into
selling at the most inopportune time.
When the markets are rising people become greedy and scared
at the same time. Greedy because they want to participate in the gains. Scared
because of their past experience of losing money in the markets, they are
afraid it would be the same again.
Future is uncertain and unknowable
No one knows what tomorrow brings. All the great gurus use
different techniques to interpret the conditions of the present and try to extrapolate
to the future. They can use varying tools to do this – fundamental analysis and
technical analysis are the two most prominent ones. People do use other tools
as well, like macro analysis, astrology, numerology etc. The main point is no
Just as an example, when Bajaj Finance was at 2000 in late
May 2020, investors were waiting for it to go to 1000. Or that they will buy it
when it went to 1200-1400. Neither prices came. Today it is 4000+.
If that is the fundamental truth, then the best course of
action is to be conservative, prudent and systematic. That is why I like the
concept of SIP (systematic investment plan). You invest NOW. You don’t wait for
a better day. Because you never know if tomorrow will be a better day or worse.
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Disclaimer: Abhishek Basumallick is the Head of the equity advisory www.intelsense.in for long term wealth creation and a pure quant focused newsletter at www.quantamental.in. The blog posts should not be construed as investment advice. Please do your own due diligence before investing.