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Tuesday, 10 November 2020

The markets are at an all time high, should I invest now or wait?

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:

Mismatch of timeframes

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 (essentially greed).

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 one knows.

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+.

Invest regularly

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.

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