Markets are making new highs almost every day now.
Rising Sensex (25K+) is inches away from falling Gold prices (27K+).
Your portfolio is up and it seems it will continue to do so for next couple of years.
The biggest bull run of our lifetimes has already started.
The last sentence is picked from many expert comments floating around. It makes me sit back and think. Didn’t we have the greatest bull run of our generation from 2003 to 2008?
Why is it that everytime markets move up and there is a general feeling of All-Will-Be-Well, experts start making statements about mothers & fathers of bull runs? If they are so smart, why aren’t they putting all there money in stock markets? For that matter, if they are so sure, why aren’t they borrowing money and putting in the stocks they feel will become multibaggers in next 2-3 years??
I don’t think any expert will be able to answer these questions.
Good Times | Have They Just Started?
I was reading this postby Vishal and as always, he has rightly highlighted the fact that just because prices of stocks we hold has gone up, does not mean that we are right. You might argue that the mere fact that you bought a stock was because you felt that it would rise. Fair enough. But my question is, that did you know how much or how fast will it rise? If your answer is a Yes, then I would say that there are atleast few people who do understand market dynamics. 😉
If you have followed Stable Investor, you would see that few of the stocks I discussed in recent past like ONGC, IOC, SAIL, Clariant, etc have rallied like anything. But just like you, I liked these stocks at prices back then. And I did invest in them because I felt that they were undervalued at those prices. As of now, these stocks offer mouth watering dividend yields (on purchase prices) and have quite a substantial capital appreciation part. So am I the next Warren Buffett?? 😉
No. I am not. And I cannot be. Period.
And to be honest, the sudden rise in share prices of these stocks came as a big surprise to me as well. I personally prefer slow growing, dull and boring businesses.
And one must always remember. A thing that is rising cannot continue to rise forever. And markets have this uncanny knack of surprising us. Both on the upside and more importantly on the downside.
It is at this time that quotes like the one below offer some seriously sagely advise.
“Remember God in good times and Equities in bad times.”
This quote was given few years back by Prashant Jain of HDFC Mutual Fund. And according to me, its one of the best quotes that we can use as a decision making tool while deciding whether to invest or not.
The Good Times here make reference to markets that have already rallied up a lot. If you buy at such high levels, chances of earning acceptable returns (more than safe fixed deposits) from your investments go down substantially. Such times are good to sell and book profits if you don’t intend to hold your stocks for decades. On the other side, when markets are down and everybody is selling, it is a very good time to buy shares of good companies which have the ability to survive the bad times and prosper in good times. A recent example of making a lot of money by investing in bad times can be the investments made in 2009. Investments made in large cap companies in 2009 have now turned out to be big multibaggers!!
Having said all this, I don’t intend to be known as a pessimist. But I prefer bear markets when I am investing and bull markets when I am selling. And since I am in accumulation phase of my investment life, I pray for Bear Markets and Crashes. 🙂
What do you think? Good times are here to stay or not? Do share your thoughts.
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