CEO Speak

All news is not bad news, is it? Likewise all forwards are not junk forwards! Are they? Just came across a random WhatsApp forward (made of lot of sense to me though) which basically talked about all the negative news that people wondered and pondered on and delayed their investments into the markets, thinking all the way that lets wait, this may not be the right time to enter the markets and before you know the markets have moved from 26000 levels of October 2016 and crossed 33000 mark in October 2017.

How remarkable is that, as I know many who have been thwarting their decisions to invest since effects of US elections, demonetisation, drop in GDP figures, GST impact and who knows the coming state elections? So much gets talked about investing regularly yet we have so many around who are waiting to “time the markets”!

As tempting as it sounds to time the market and try and predict the tops and bottoms of the market, no one has ever got it right over a period of multiple time horizons or market cycles. Even professionals have not got it right let alone laymen investors. Hence, what we strongly subscribe to is the “time spent in the market “instead of the “timing of the market”.

A recent report of Morgan Stanley also substantiates the same. They have analysed the data of the past 22 years, a total of 5500 trading days since 1995. There are the best 100 days which have accounted for 600% return out of the 900% return in those 5500 days. And then there are the worst 100 days which, if one could have avoided, one could have earned a whopping 1400% return. If only!

It’s practically impossible to have timed the market and take advantage of the best and the worst trading days. Hence, goes without saying, that the very idea that a common investor can time the market is wishful thinking. What commonly ends up happening is that the investment pattern of the common retail investor is driven by either market frenzy, which makes him invest when the markets are almost at the top, else, by misplaced panic when he ends up selling when the markets are at the bottom. Technically ends up timing the market upside down.

What will however be prudent is to keep investing at regular intervals of time and stay invested for a longer time horizon. That’s why I am an all time advocate of Systematic Investment Plans which averages out the ups and downs in the market and still ends up building wealth for the investor who has kept investing regularly over a long period of time – 5 or 10 years or more.

Your investment decisions should be driven by a financial goal, hence, a time frame. And that sole decision making criterion should not undermined or forgotten under the stress of market movements, whichever way the markets move, northwards or southwards.

So if you are still wondering if it’s the “right time” to get into the markets at 33000 levels, I cannot give you any predictions on that. And I wonder if anyone can. However, what I can tell you is that, it may be wise for you to start an SIP.

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