What Goes Up Must Come Down. That is the conventional wisdom, especially conservative investors conventional wisdom. The question is how far it will go up and how long will it stay up before it comes down? When it comes to markets, especially equity markets, how far do you ride a rally before jumping off to safety?
The experts will tell you “be cautious, be safe, and don’t take too many risks especially while investing your hard earned money. Be cynical, don’t play smartass hanky panky games and if by some lucky fortune you have made good money in stocks, get out while the going is good”.
Experts will not tell you the consequences of getting out too early. You will see markets or stocks going higher and higher and you may just end up investing at the highest levels. Is Apple, Amazon or Google Overvalued? The competitors will tell you that they are not. Similarly, if markets are rising and rising fast, do not take the easiest route of selling or staying away. Instead look at what lies ahead.
Nifty is very close to 9000 levels, Nifty Midcap, Nifty Next 50, Nifty 100, Nifty 200, Nifty 500 all made lifetime highs last week. The up move has been swift, the sceptical Indian investor is worried and wants to know whether this rally will be sustained or will crash like a rock.
We believe unabashedly that this is a sustainable rally, Nifty is trading at PE of 23 & 1 Year fwd PE of 17, market has not overshot fundamentals completely and gone on to a bubble euphoric zones.
Can there be a correction for some unknown unfathomable reason which the market grapples with? Sure it can.
If you have invested your risk capital in equities, we think that you should keep the faith.
Yes, we all know of toxic stocks who have tanked and friends and family who have lost their shirt. It is also true that we may never be lucky enough to pick the all time famous multi bagger stocks like Wipro or Infosys.
But here is the thing about some great companies and thereby their stocks, if they get their act right then literally there is no ceiling to how much wealth they can generate.
Consider this statistic, the combined valuation of US tech giant’s facebook, Apple, Amazon & Alphabet is US $2.1 trillion. It is more than the combined valuation of all the stocks listed on the Bombay Stock Exchange. Unbelievable isn’t it?…
It is a lot of money and has been created in the last 10 -15 years.
The point I am trying to make is that if you catch a trend right and are in the right stocks and you keep the faith and stay invested through the markets highs & troughs, then the cliched sky is the limit.
You may argue that these companies are from the US which is different.What about our markets? Our markets may not generate that kind of returns.
Here are examples of everyday stocks where if you had stayed invested then you could have made extraordinary returns.
The conclusion is that if there is visibility of growth and profitability in the stocks you hold then go against the conventional wisdom which say that what goes up has to come down and has to come down with a crash.
There is a possibility that some stocks can go up for years and years and can stabilize and may then give normal returns. It is up to you when to get off at whichever stage of the life cycle of the stock.
Yes, we are very close to all time highs in Indian Equities. The roller coaster has taken a few twists, turns and dips but hang on it may still go up higher.
