Should You Invest When Stocks Are This High?

2017 witnessed many stocks touching its all-time high. Come 2018, Indian stock market took a U-turn and underwent correction to the tune of ~10% before it could recuperate. However, few stocks successfully weathered these storms. They have grown leaps and bounds in the last 5 years and are currently hovering around their peak levels. Irrespective of their impressive growth trajectory, few novice investors hold the viewpoint that it may not be right time to bet on such stocks owing to their gargantuan growth story. Irrespective of the malicious repercussions of timing the market, is it still easy to resist the temptation of timing the markets even while evaluating stocks which have grown 5-10 times in 5 years? Here, we list few parameters to consider while investing in such stocks:

  1. Tenure of your investment: If an investor is scouting for a long term investment, leveraging on rupee-cost averaging benefits will give them an insulation against oscillating market movements. For e.g. an investor can consider a systematic investment of INR 10,000 every month towards high-growth stocks, provided they clear the fundamental equity analysis test.
  2. Filter out the emotions from your equity investment decisions: One may always think that if the stocks are at their zenith, they are too expensive to buy. However, the biggest reason behind the losses in the Indian stocks market is the incompetence to control one’s emotions. The best way to invest in stocks is to take the role of irrational thinking out of the process and rely on research-based data.
  3. The inclusion of corporate earnings in the decision-making process: We are witnessing a revival in corporate earnings, which in turn aggregates the possibility of an upswing in the stock prices in the long run, which will eventually lead you towards wealth creation. The only disclaimer over here is: Stay Patient, Disciplined and Persistent.
  4. Current market price doesn’t tell a thing about the stock’s growth potential: We saved the most important and valuable tip for the last. Just because few stocks are expensive, doesn’t mean they are not worth a buy. Similarly, a cheap stock doesn’t guarantee wealth creation. The future of stock’s growth is driven by management decisions, strength of the financial statements, corporate governance policies, vision of the management, business expansion plans, amongst many other countless things; and this definitely doesn’t involve current market price.

Wise Spending Is Part Of Wise Investing. And It Is Never Too Late To Start – Rhonda Katz