Should you Invest, Hold or Redeem at Life Time High Market Levels?

Content credit - FundsIndia?

Indian equity markets?are close to their?previous all-time highs & its natural to be nervous with what to expect from the markets because we have seen in the past how markets fall from higher levels. Look at Sep 21 - May 23 for instance. We have been falling from the ~61,000 odd levels on Sensex & again back there.

(Q) Can the market generate your expected returns if it does not hit life highs time & again?

• All-time highs are a normal and inevitable part of long-term equity investing. Without hitting all-time highs, markets cannot grow and generate returns!
• If you expect 12% returns, then it means the index will double in 6 years, become 4X in 12 years, and 10X in 20 years.
• In other words, the index will inevitably have to hit and surpass several all-time highs over time if it has to grow as per your expectation.

(Q) Does it fall from all time highs?

• Between 2008 - 2014, markets found it difficult every time it came near the all time highs of ~6500 but Nifty generated a whopping 73% the next time it crossed it & hit another life high

• Between 2018 - 20, Nifty was stuck at ~ 12,000 levels but generated another whopping 50% once it crossed it

• The average 1 year returns in Nifty 50 TRI after an all-time high is 14%. Infact, 57% of the times, the 1 year returns is more than 12%.

To put things in perspective,

• We have already got rejected at all time highs 4 times at the current levels of ~61000 - ~63,000
• Going by the historical data points, it is anytime that this can break on the higher side
• Immediate returns post the break out are whopping?
• Its worth staying invested or adding to investments than redeeming because we are neither in an expensive valuation, nor are we at the end of a good earnings cycle or for that matter there are any euphoric sentiments.
• The best way to invest at this point is to increase your time horizon to at least 5 years
• Stagger your investments using a weekly STP for the next 3-6 months

P.S. - Dont forget to like & comment :)

Best Regards,

Kirtan Shah,

Team FPA