The implementation of the Goods and Services Tax (GST) has certainly boosted the Indian stock markets. In the past 10 days or so, since the GST came into effect, the broader market indices–Sensex and Nifty–have been up by around 2%.
The equity markets have been steadily going up for the past couple of months. While this is very good news for the Indian economy, it puts the lay equity investor in a quandary. The question on everyone’s mind is–Should I invest now or wait for a market correction?
Let’s try to answer this question with an example from our daily lives. Allow the assumption that you take an Uber to work every day. Each morning, you get ready and open the Uber app to book your ride. What do you do on the days when the fare you’re shown is more expensive than usual? Do you cancel and decide to not go to work that day? No, you book the cab at a higher fare and get to work. You can’t miss work because that would lead to a pay cut. You would lose more money by missing work than you would by paying a higher cab fare for that day. Hence, missing work would translate into an opportunity loss.
In much the same manner, waiting for a market correction to start investing would also result in an opportunity loss. This is exactly why you should start investing in equities. If you keep waiting for a market correction, you will only keep waiting. Once a small correction comes, you will wait for the markets to go down further. It will never end. And while you keep waiting, the investable money lies idle in a bank account earning literally next to nothing.
This is why you should invest, even at a market high, as the markets are only going to go higher. Sure, there will be a few hiccups on the way, but the general market trajectory is going to be largely upward-looking.
But before you go ahead and start investing in equities at a market high, here are a few things that you should keep in mind:
- Invest in equity mutual funds. Trading in the stock market is tricky and is not everyone’s ball game. It requires high levels of expertise, knowledge and experience. A better alternative is an equity mutual fund. You get an expert fund manager to pick the stocks and sectors for you. All you have to do is choose a well-performing equity fund to invest in.
- Go the SIP way. One mistake you shouldn’t commit is invest a lump sum at a market high. Don’t put yourself at the risk of catching a market peak. Instead, spread your investments over a period of time by starting a systematic investment plan (SIP) in a well-performing fund. You will be able to invest at different levels of the market and average out your cost of acquisition.
- Align investments to goals. Mapping specific mutual funds to specific goals will help you not only choose mutual funds correctly, but also keep track of them in a better way. You can choose mutual funds depending upon the term and the negotiability of the goal.
All said and done, market highs and market lows will come and go. The gyrations shouldn’t bother long-term investors. You should keep your eye on your goals and invest for them in a systematic manner. If you have to go to office, you have to take that Uber, after all.