Afraid of Sensex’s dizzying height? Take a deep breath


(This story originally appeared in on Sep 25, 2021)

MUMBAI: There’s no reason for investors in the stock market to feel fearful when the benchmarks are at record peaks, provided they’ve invested after due diligence relating to their risk-taking ability and have several years on their hands before they would need the money.

New investors, however, should ideally not put all their investible funds in the market in one shot. They would be better off if they invest in a staggered manner over the next six months to a year by slicing their whole fund into several small chunks, financial advisers said.

“If you are a long-term investor already invested in stocks, hold on and enjoy the party,” said Ladderup Wealth Management MD Raghvendra Nath. “One should take confidence from the fact that the current rally is backed by three important factors: Economic fundamentals are falling in place, there’s enough liquidity in the system and there is ample investor interest in the market. I don’t see this rally being punctured in a hurry.”

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On Friday, the sensex crossed the 60k mark for the first time and some market commentators feel that the market is too heated up now.

Wiseinvest CEO Hemant Rustagi, a registered mutual fund distributor, said that at times the leading equity benchmarks could intimidate investors and could force people to be in awe of it.

“That’s how (equity) markets are…But if you’ve done your risk-profiling correctly that allows you to invest in equities, and also the time horizon to reach your goals is not close, don’t get carried away by the pace of the rally. Nor should you become fearful of the fact that the sensex is at such a high level,” Rustagi said.

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What about those who want to enter the market now? “They should keep in mind that in the stock market there would be periods of euphoria, phases of absolute quiet and then negative returns also. That’s part of the process of the natural progress of the market,” Rustagi said. One should not come with a short-term view.

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If an investor has about 10-15 years or more to reach his financial goal, a systematic investment plan (SIP) in mutual funds is the best route. In setting up SIPs, it’s better to distribute the monthly portfolio allocation in the ratio of 50-60% in large-cap funds and the balance distributed between mid-cap as well as small-cap funds, according to leading financial advisers.

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