The Indian equity market is at an all-time high. The bull run has been going on for almost 6 months. And nobody can predict what's next.
But the question for most retail investors is what should be their position in these confusing situations. Well, we don't know where the market is heading but we can avoid some mistakes and still earn gains from this bull run.
Want to know how? Read the full article and know what mistakes you should avoid in the current equity market.
Before jumping to our topic let's first understand what is going on in the current equity market. Right now the market is in the recovery stage and is recovering from the pandemic crash. There is a lot of liquidity in the market through the government as well as the newly joined retail investors. The market is setting new high records every day despite multiple predictions regarding the correction. There are many IPO's including the biggest IPO of India are coming into the market and many are listing with er premium gains. Well to put in a few words all is well in the current equity market. So now let's understand what mistakes you should avoid during this time to ensure your gains.
Mistakes to avoid in the current equity market
1. Do not go all in
A lot of people due to the greed of attractive returns in the current equity market are putting all their money in the equity markets. The equity market right now is overvalued as well as not really in sync with the economy. There are a lot of fluctuations happening in the market one cannot predict when the corrections will come and how big they will be. That's why for retail investors it is wise to invest some of the money in mutual funds through systematic investment plans to ensure the safety of capital. Asset allocation is very significant in Wealth building so distributing your savings in different asset categories is important. Some investments in equity mutual funds will ensure your gains even if the correction comes. Systematic investment plans are the best choice in the bull run as they give you the benefit in the Bull as well as the Bear run.
2. Diversification is the key
A lot of new retail investors have entered the equity market since the pandemic recovery times. This new slot of investors have only witnessed the Bull run and this makes a lot of people think that the share market only grows the money. But that's not the case if your money is not invested in the share market without proper research analysis and portfolio management you may lose all your life savings. To create wealth diversification is the key. You must invest your money in the risk as well as defending types of investment. It is important to keep some savings in the liquid as well as debt funds or gold bonds to secure your capital even if the market falls.
3. Running behind IPO rally
There are millions of initial public offerings coming into the market and most of them are listing with humongous gains. How is this happening? Why is this happening? We don't know right now but this can be the balloon that will burst soon. A lot of people are applying for these offerings without the proper research. Many of these initial public offerings are tremendously overvalued and should not run behind the immediate gains. The stock market is not gambling or speculation so research well before putting your hard-earned money.
4. Do not be greedy
The great investor Warren Buffett has said be fearful when others are greedy and be greedy when others are fearful. This quote is perfect for the current equity market as everyone is buying stocks in the greed of immediate gains. You have to be patient with your investments. Go along with your financial goals, do not put all your money in the stock market just because of greed. Be patient and grow your money in all the asset classes.
To sum up, do not think of the stock market as a"25 dins main paisa double scheme", be patient and know the power of compounding and long term investing. Diversify your portfolio, keep your investments growing as well as defend asset classes. The Bull run may continue or the correction may come. We don't know what's next but an intelligent investor with good psychology will surely grow.