- May 2014
- December 2013
Kripananda Chidambaram, 14 May 2014
In the last few weeks we have seen the stock market doing exceedingly well and hitting lifetime highs. Sensex has crossed 24000 for the first time in the history and there are more records to come it seems.
Many a times market movements be it a surge or crash poises lot of questions in the minds of the investor.
The evaluation of market rise or dip should be seen in time perspective; short term or long term. The simple rule is if you are not a stock trader then just ignore any such adverse movements. Only professional stock traders need to bother and the rest can shut their ears to the market noise.
Usually when the market rise or fall is event based then the impact on your returns will be for short term. Investors, typically the long term ones and the SIP investors need not get too excited or worried about their investments.
Long term investors and SIP investors should always focus on the overall economic condition as that is what will reflect in your returns. Performance of your investments will always be a projection of what is happening in the economy.
Now let us find out what is the basis of the current surge in the markets. Whether it is event based or does it have any impact on long term.
It is quite obvious that market is expecting NDA to form the government and give us a stable one. The short term play is what you are witnessing now and stock traders are participating big time on the positives of a Modi led government. Now does this have any impact for long term investors? A straight answer is no because it is still a speculation that a Modi led government will help grow our economy.
But if one does wish to take a call on how good this event will turn out in the long run, then there does seem to be quite a number of encouraging signals coming through, especially the economic impact of a stable government and a visionary leader.
Let us now take this question as to whether it is the right time to invest or exit from your investments.
First rule you need to follow is unless you are a stock trader never ever entertain this question in your mind. For long term investors and SIP investors the answer is always NOW. It does not matter whether Sensex is 19000 or 24000, NOW will always be the right time to invest. All you need to find out is whether you have money and you are pretty sure that you will not require that money in the next 5-6 years then that very day is the right time to invest in markets. Do not try to time the market; no one can ever do that.
Similarly the answer to when to exit is NOW, i.e. when you need the money. The exit from your investments should be purely on need basis and not on what level the markets are.