Should I invest near the market highs?

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One of the news that caught our attention was the number of discontinued SIPs. The number of people discontinuing their SIP increased from 13.2 lacs in April to 14.2 lacs in May.

Its easy to see that this is happening because we are now close to market highs and virtually everyone in the market is sitting at handsome profits.

Ofcourse, if you ask us to choose between inveating near highs vs investing near lows, like everyone else, we would pick investing near the lows. But nobody knows when the highs and lows would occur.

We are getting so many queries asking us if it’s the right time to invest in markets.

And the idea to selling near the top and buying back when the markets correct is a very attractive one.

The problem with this idea is that almost everyone who tries this gets it wrong because you must be right twice on order for you to come out ahead. Firstly, you have got to sell near the top, and assuming you were lucky enough to catch the top, you must again plan to enter after the correction, and you have to correct with both these decisions.

Infact far more money has been lost in waiting for the crash than during the actual crash. If you are investing for the long term, its immaterial if the market is near the highs or near the lows, this is not going to be a significant decision.

The key is knowing your time horizon of investments and your asset allocation. Those are much more important questions to answer than knowing the top or the bottom.

The longer your investment horizon is, the more edge you have got.

10 years back Nifty was about 6000 level, and in last 10 years it has grown more than 3 times to 18000.

Now lets see what’s expected in next 10 years.

Per capital income increased 65% in last 10 years, and is expected to grow by more than 100% in next 10 years. The higher disposable income will make many new businesses viable because they will be able to operate a economies of scale.
Nominal GDP grew at CAGR 5.7% in last 10 years and is expected to grow at 9.6% CAGR in next 10. One big reason for this change is the physical and digital infrastructure has improved immensely in the past decade.
Manufacturing output grew by $373B and expected to grow by more than $1500B in next 10 years.

Conclusion:

Investing near all time highs is not much different from investing at any other time if one takes longer term view. Having longer term view will also help investors tide over the volatility that one goes through in the short term.

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Vivek Sharma

The content in this article is purely the author’s personal opinion and is for informational and educational purposes only. It should not be construed as professional financial advice and nor to be construed as an offer to buy /sell or the solicitation of an offer to buy / sell any security or financial products. The views and opinions stated in the content belong to the author. Estee Advisors Pvt. Ltd does not uphold nor promote any of the views / opinions. | Estee Advisors Pvt. Ltd is a SEBI registered Investment Advisor (Regn. No. INA000016463)

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