The market is at an all-time high, and NIFTY has recently crossed the 18,000 mark. The Indian market is regularly achieving new heights after the March-April 2020 crash. In the last six months, NIFTY has gained over 25 percent.
The recent market run is definitely not backed by corporate earnings. Yes, the results have been excellent but certainly not as high as the market is going. For a novice investor who has just entered the market, it is essential to understand the reasons for the rally.
The Indian market has had many positive factors in the last few months. Some of them are – more investors investing, unlocking, good monsoon, positive developments in government policy, and investors’ confidence. The lower interest rate has started a growth momentum in the real estate sector. It has a ripple effect on multiple sectors.
Will the bull run continue? On this, the experts’ opinion is divided into two extremes:
- The first segment believes this to be just the start of the bull run in India, and NIFTY will cross the 20,000 level by year-end.
- The other half believes since the market has not seen any significant fall in the last six months, a correction is due. They believe 10 to 15 percent correction is likely to come before year-end or early next year.
The question is – what should a retail investor do? Which side should he take? How to approach the equity market today?
You may be having hundreds of questions and doubts related to investing in present times. The answer is simple – when in doubt, go back to the basics.
We don’t know which side the market will go. However, we know with certainty that there is always a buying opportunity in the market. New investors, who have gained 200 percent or 400 percent or even more in the last 18 months, should not expect the same in the future.
Neither people should start investing in the market with similar expectations.
How to approach the equity market today?
If you can follow the below points, you can make excellent returns even at present times:
Know your investment horizon – The first thing you should know is your investment horizon. You should not put your money in equity with a short investment horizon. Anything less than two years can be risky at this point. You need to ask yourself – Am I ready to take the risk (if investment duration is short)? When you know your investment duration, you can make the right investment decisions in such times.
Don’t take a side – We discussed above two extreme opinions market experts have. We would want you not to take any side. Instead, go to the basics. Don’t sit on a pile of cash waiting for the correction to happen. Neither should you invest all your money being 100% confident this is the start of the bull run. You can keep a small percent in cash (or invest in debt funds). Continue your regular investments in stocks. The best way would be to invest in stocks via SIP in present times.
Follow a strategy – When the market is at an all-time high or low, emotions govern most of our investment decisions. Sadly, when we make an emotion-based investment, more often than not, we are wrong. Hence during such times, you must try to automate your investment process.
There are many investment strategies, and you can follow any of them. When the market is high, many investors and portfolio managers follow Core and Satellite Investment Strategy. The core part of the strategy applies to the stable and long-term holding of the portfolio. The satellite signifies that a part of your portfolio will focus on growth. It will push the overall return of the portfolio. The core part should be 65-70% of your portfolio and must be in a large-cap fund. The Satellite part (remaining 30-35%) should be in small and mid-cap.
You can make a change to the strategy based on your risk capacity and investment horizon. We hope you got the point- create your investment plan and ensure you execute it without letting emotions come in between.
Keep learning – Investing is an ongoing process, and if you need to excel at it year on year, you have to keep learning. You should continuously monitor the stocks you are invested in and keep yourself updated with the latest happening in different sectors and markets. Stock markets can be a vehicle for creating wealth, provided you learn how the markets operate and how individual companies are valued. You should gain knowledge by reading books of investment gurus, and tracking markets will keep you updated.
All this may look like too much effort. A retail investor has his 9 to 5 job, kids to take care of, and a passion to follow. He may not have time for all that we have discussed. Here comes the problem – when you invest without 100% knowledge and dedication, the chances of making a wrong investment decision increase.
For this reason, we have created Jarvis Invest – an AI-driven platform that uses data and not emotions to pick stocks. Download our app, explore the investment opportunities, make investments and enjoy your time with your family without worrying about the stocks Jarvis will select for you.