Market Madness: Should You Fly Higher or Play It Safe?

I don't have a better word - madness

I feel good about the current market with all the returns I see on my portfolio. But, at the same moment, I feel nervous. Let me explain why.

In 2019, I took a ride on a hot air balloon. Here is the feeling for most people on a hot air balloon. As we ascend higher and higher on the balloon, the ground below shrinks - it is an amazing feeling. We feel a sense of exhilaration and freedom as if we are floating above the world. The view is breathtaking, and the experience is truly unforgettable. I still remember every second of my ride on the balloon.

You have not been on a hot air balloon? No worries, you still know the feeling. This feeling is similar to the excitement you are currently experiencing as the market is consistently reaching new highs. The sense of accomplishment and financial gain can be intoxicating.

However, once the hot air balloon ascends too high, one can start to become nervous. The same nervousness can (should) happen with the euphoria of a consistently rising market. When the market reaches extreme heights (as it has presently), it becomes more susceptible to sudden corrections or even crashes.

Many people are waiting for a correction but no one knows when it will come.

To be honest, it difficult to find a quality stock at a fair or even not-so-fair valuation and make an investment today.

Before I discuss what I am doing, I thought to share some insights from industry veterans. I reached Sumit Chanda, CEO, Jarvis Invest (a cool platform that helps you pick stocks using AI) to get his insights on the current situation. Here is his take:

Q: Where do you see the market from here? Has the market peaked?

A: I believe that the unidirectional upward move that the investors are experiencing will soon end. History does repeat itself. Looking at past similar events, I can say that extended periods of upward momentum are often followed by periods of consolidation or correction. Corrections look difficult with all the money flowing in but we may see consolidation.

Q: How to make money in this market?

A: The markets might still generate returns but investors need to put in efforts in picking the right sector and industry. Now it would be the time of the value stocks. They will outperform the Momentums and Growth stocks.

Q: Words of wisdom for the readers

A: I feel investors should avoid looking for short-term double-digit profits and rather build their portfolios for a longer-term horizon for superior returns.

What am I doing in this market?

I find it difficult to put money in the market at this point without proper research. I am unable to top up my existing stocks because of premium valuations.

The good news is that 80-85% of my investment is automated (Send me an email at abcofinvesting@gmail to discuss more on it). So, irrespective of the market condition, 80-85% of my total monthly investment goes to small, mid-, and large-cap mutual funds. Plus Nifty50, Next 50 and Nasdaq index. I don’t know if it is right move or not but I know I cannot time the market. The market may touch 30K by the end of FY25, so money needs to go in.

The challenge I am currently facing is to deploy the remaining 15-20%. If the market corrects, I am sitting on some cash to put in the market. If correction does not happens, I see some opportunities in private banks and IT companies so will perhaps deploy my money there.

One thing is for sure - I won’t wait too long for the correction as the Indian mutual funds are sitting on Rs 2.45 lakh crore cash or 6% of total equity assets. A deep correction and that too for a long will not happen. Well, it can but the data and logic suggest, it won’t. Secondly, with the Fed interest rate cut, FII money will start flowing to the Indian market.

It is Hard!!

People say it is hard to make money in the bear market but the same holds in the bull market. As an investor, you have to be more careful in this market. You should not blindly put money in this kind of market. Also, please don’t invest in stocks out of FOMO - Fear of Missing Out. The excitement and potential for large gains can lead to emotional investing, making it difficult to stay disciplined.

THE KEY TO SUCCESS IN THIS MARKET WILL BE DISCIPLINE

I would love each reader’s investing strategy in this market madness.

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