How can one make disciplined investments in a market that is surging? MintGenie clarifies

 How can one make disciplined investments in a market that is surging? MintGenie clarifies

September saw record highs for both the Sensex and Nifty, India's major indexes, which had just reached all-time highs. Although there is excitement around the new equities records, experts are increasingly advising us not to place too much weight on the benchmark indexes.

According to market analysts, a defined investment strategy and a disciplined approach to investing are more significant than ephemeral benchmarks.

"Because benchmarks are rising, retail investors shouldn't worry too much about market levels," suggests Mayank Bhatnagar, Chief Operating Officer of FinEdge.

According to Anil Ghelani, Head of Passive Investment as well as Products at DSP Mutual Fund, "with markets hitting new highs, there is a need for retail investors to maintain a suitable asset allocation to equity instead of worrying about being left out." He suggests that it would be best to avoid making any significant changes, such as buying a lot more or booking gains and sitting on cash.

Benchmark monitoring does not provide the full picture, according to Shaily Gang, Head of Products at Tata Asset Management. "Markets have not been linear with peaks as well as bottoms getting formed in the journey."

Thus, during the course of the previous 30 years, the Nifty 50 has had brief drops of more than 10–20% every other year and brief falls of more than 30% once every eight to ten years, all while recording a little over 13% CAGR (Compounded Annual Growth Rate). Experts point out that it is almost impossible to predict when market peaks and bottoms will develop.

Bhatnagar suggests that investors stick to their well-defined goal-based approach and continue making methodical, disciplined equity investments. Before making an investment, however, it's critical for investors to have realistic expectations and to be aware of the dangers and benefits.

The majority of the time, investment endeavors fail as a result of investors' failure to adequately establish expectations and comprehend what they are entering into. Experts claim that patience and discipline pay off in the stock market.

So, even if stocks are at high levels, you have made the decision to get into the equity market. Professionals provide you advice on how to proceed.

It is essential that retail investors stagger their market investments by using mechanisms such as Systematic Investment Plans (SIPs) and Systematic Transfer Plans (STPs). Experts suggest that regardless of market levels, this should be the general rule of thumb.

This is the only long-term, really tested technique for building wealth with stocks.

The number of positive returns grew and the number of negative returns dropped with time when the daily index values of the Nifty 50 were plotted for one, three, five, seven, and ten years. When rolling returns were taken over a period of seven years and beyond, the occurrences of negative returns went to zero. According to Gang, "this is the advantage of long-term investing."

Depending on the asset allocation methodology each one uses, products like Balanced Advantage funds may modify the net equity exposure levels based on macro factors and market values. Investors may increase their exposure to these products during periods of market volatility or during times when values have increased.

To traverse different market stages, funds may be tied to features such as the Systematic Transfer Plan, Flex STP, and Trigger feature. Using the aforementioned features—the debt scheme as the source scheme and the equity scheme as the target scheme—one may get market exposure. According to Gang, "exposure away from the markets can be executed vice-versa," citing the MF's viewpoint of considering investments at high levels.

Ultimately, however, both you and the investor need to be aware of your priorities. "Rather than making haphazard investments without a clear purpose," Bhatnagar argues, "it is important to set up clearly defined goals and invest according to them."

Evaluation criteria

Different stock market valuation indicators, such as P/E, may be used as a guide for making investments. Experts discussed the applicability of these measurements in an environment with high equity levels.

"Investors can evaluate the current valuation by examining valuation metrics such as forward P/E and contrasting them with historical averages," suggests Gang.

The market premiums in India might be contrasted with the historical average premiums in other emerging markets.

Once again in India, the valuation of market-cap groups might be examined to see if small- and mid-cap stocks are selling at a little or substantial premium over large-cap stocks in order to determine their relative attractiveness.

Retail investors shouldn't give value indicators much weight, according to Bhatnagar. Rather, they need to concentrate more on developing a strong investment strategy that strengthens resistance to market swings. These indicators are not useful for timing market entrance or exit, but they do provide you with a general picture of where we are in terms of value. The optimal approach to invest in stocks is to keep up your SIPs throughout the course of market cycles.