The year is come to an end, with markets touching all-time highs and investors are asking:
While these questions are valid, we go a step further and ask, “What is All-Time High, and does it hold any significance?”
Simply put, all-time highs are when markets beat their previously recorded highest levels.
And their significance?
Well, that answer varies depending on your investing style:
If anything, the shooting up of equity valuations can cause asset allocation mismatch.
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Building on this insight, let us see why the market making peaks more normal than the news and noise around it:
So, are markets peaking a frequent instance? No.
So, should I exit my investments to realise market potential at its upside best? Also, No
Saying yes to the 2nd question would mean that markets will never materialise at current levels. However, as we saw from the graph above, this is false.
Another interesting fact here is that, on average, it took only 1.4 years for Nifty50 to reach a new peak. Here are some figures to look at:
Hence, those who redeemed their investments in any year, considering the current year’s market levels as the peak, have missed better opportunities ahead.
Today, while markets are not particularly range-bound, it is touching new all-time highs.
So, can SIPs work in today’s markets? Instead, how effective is it as a tool for investing when markets are at their peak?
Case in point: SIP investments, if started at the previous market, peak
Irrespective of market levels, even those who have precisely timed the market and started the investments at the peak have also made inflation-beating returns.
The lesson that investors should learn from the past is to focus on time rather than timing.
Now, as you might have understood that the reason why we feel making a peak is more normal than the news and noise around it, let’s also understand why we feel the peak is normal and backed by strong fundamentals.
Few of them are listed below:
Investor Takeaway
“The stock market is designed to transfer money from the active to the patient” –> Warren Buffet.
At 93, Mr Buffett has sworn by these words since age 11, and look at where he stands today.
Fun fact: Mr Buffett had most of his wealth created after age 65.
As time passes, markets will caress newer highs only to solicit the old reactions. And for when that happens, resort back to this note to keep emotions at bay and act in the interest of investing principles.
And lastly, here’s a fun math fact for all those who think exciting at the market
all-time time high will tide over all their losses:
Hence, think wise and act wiser. More critical than valuing market levels is your investment time in the markets.
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