Don’t Try to ‘Time’ the Mar­ket, Stick to Your In­vest­ment Plan

Ex­perts ad­vise against en­ter­ing the mar­ket to cash in on the poll eu­pho­ria. In­stead, in­vestors must go about putting their money in a stag­gered man­ner with a 15-18 month hori­zon, says Madhu T

The Economic Times - - Markets & Finance -

Many cau­tious in­vestors, who played ex­tremely safe and chose se­cured in­vest­ment op­tions dur­ing the elec­tion year, are tempted to cash in on the eu­pho­ria sur­round­ing the new govern­ment’s for­ma­tion at the Cen­tre af­ter the exit poll re­sults, say sev­eral fi­nan­cial ad­vi­sors. Talk of stock mar­ket hit­ting 30000, soft­en­ing of in­ter­est rates, and pol­icy ini­tia­tives by the new govern­ment to fuel eco­nomic growth are lur­ing in­vestors to aban­don safe perches and wade into the trou­ble­some debt and stock mar­kets for hand­some re­turns.

Most in­vestors had al­tered their orig­i­nal plan and opted for safer av­enues like liq­uid funds, FDs, fixed ma­tu­rity plans as they wanted to avoid the vo­latil­ity ahead of the elec­tions.

“It al­ways hap­pens in the mar­ket. Many in­vestors don’t see im­por­tant events as just one of those things that in­flu­ence the mar­ket in the short term,” says D Sun­darara­jan, in­vest­ment con­sul­tant, Trendy In­vest­ments. “With exit poll re­sults and all great pre­dic­tions for the fu­ture, many in­vestors be­lieve it is time to make some quick bucks. Un­for­tu­nately, a new high in the stock mar­ket al­ways lures in­vestors back into the mar­ket and mostly they are obliv­i­ous of the risks,” he adds.

Think Like a Novice

Many ad­vi­sors barely hide their an- noy­ance, while dis­cussing about in­vestors who try to ‘time’ the mar­ket. They claim this tribe al­most al­ways gets it wrong and loses money, but never mends its ways. “Look at them. They got out when the mar­ket was around 20000 be­cause they didn’t see any upside. Now, they are bullish when the mar­ket is around 24000,” says an in­vest­ment con­sul­tant, who does not want to be named. He be­lieves those who are get­ting to the mar­ket won’t have the pa­tience to go through the en­tire cy­cle and will cash out when the mar­ket is volatile or moves in a tight range.

Lovaii Navlakhi, MD & chief fi­nan­cial plan­ner, In­ter­na­tional Money Mat­ters, says that he treats in­di­vid­u­als try­ing to get back like some­one who just got a lot of money to­day. “The first thing is to sit down with them and fix goals and (make) an as­set al­lo­ca­tion plan for them. The next thing is to go about im­ple­ment­ing it in a sys­tem­atic way,” he says. Navlakhi of­fers an ex­am­ple to drive the point home. A per­son wants to in­vest .` 100 to­day. As per his as­set al­lo­ca­tion, he is sup­posed to in­vest .` 60 in stocks and the rest in debt. But with the mar­ket hov­er­ing around all-time highs, the per­son would put just .` 20 in the eq­uity im­me­di­ately and plan for a stag­gered in­vest­ment in the next three months. “Be­tween exit poll and ac­tual re­sults and be­tween the new govern­ment for­ma­tion and pol­icy for­mu­la­tion, the mar­ket may see many ups and downs and it will give the per­son enough op­por­tu­nity to in­vest in the mar­ket,” says Nav-

Be­tween exit polls & ac­tual re­sults, & be­tween the new govern­ment for­ma­tion & pol­icy for­mu­la­tion, the mar­ket may see many ups & downs & it will give the per­son enough op­por­tu­nity to in­vest in the mar­ket

lakhi. He adds that the same strat­egy worked well for his clients when the mar­ket was 8000 last time and people were scared to put money. “Those who lis­tened to us and in­vested money back in a stag­gered man­ner, man­aged to in­vest all their money by the time the mar­ket hit 10000. Those people don’t try to time the mar­ket any­more. They have seen how it works.”

Don’t Lose Pa­tience

The mar­kets, both debt and eq­uity, are likely to test your pa­tience in the next few months, say ex­perts. “One should give up the idea of mak­ing 5% or 10% in the next few weeks or months and fo­cus on long-term goals. If you don’t have the pa­tience to go through ups and downs, you are again likely to flee the mar­ket,” says Sun­darara­jan. If you en­ter when the mar­ket is hov­er­ing around all-time highs, you would mostly end up sell­ing at a loss if you can’t stomach the vo­latil­ity. Sun­dara­jan says the same rule ap­plies to debt in­vest­ments. “In­ter­est rates are un­likely to fall any time soon. It will take at least a cou­ple of quar­ters. In­vestors who are en­ter­ing into debt mar­ket should keep this in mind,” he says. Ac­cord­ing to him, it makes sense to in­vest in in­come funds, in­come op­por­tu­nity funds, and dy­namic funds with a view of 15-18 months.

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