The common man who reacts to the media sharks normally misses the sharpest fall, and many a times the sharpest rise too.
So typically he will read the papers today (Monday morning) and react on Monday (25th Aug) right up to say 10th Sept. So the market which came down from about 27000 to 25500 – and that is not a very big fall.
The semi-brave ones will look for a chance to invest at 25,500, but may not be ready for another 1000 point fall followed by a 1000 point meltdown.
The brave ones will be ready for a further fall. I bought yesterday with a willingness to hold a falling knife. Yes I know somewhere I can go wrong…but I just executed an already thought of trade. I just went ahead with the purchase, and did not postpone. Yes I bought 1/3rd of what Quantity i wanted, leaving some cash on the table.
I remember when the index was 11000 on the way down I called 9k as the bottom, but many technical analysts (including bear king Shankar Sharma) called 6k. My take was I would be a buyer at 9k, 8k and 6k. Market turned at about 8k..and I had no clue when it would touch 21k – the previous high. IT DID NOT MATTER.
If I call it right, I have to be able to get all the following right:
- how far it will go down – 25k, 23k, or 20k (no point in giving a vague number, EXACT NUMBER)
- how long will it remain there (exactly so that I can buy a few days before it goes up again)
- how fast it will move up and till where (If it goes down to 21k and remains there for a month and goes up to 27k and again goes to 24k…I should get all that right)
- till what time it will remain at the top.
Sadly none of us know that so:
Shankar Sharma will say..there will be pain, markets are doomed, you can see only downside, markets will NEVER go up.
Rakesh Jhunjhunwala will say the market has done a technical correction, it will recover in 5 weeks – the bull market is on.
Prashant Jain, Naren Sankaran, Balasubramaniam, – the mutual fund industry in general will say “keep your SIP going, this is just temporary. Remember if you are remunerated on the basis of the aum, and not on the basis of performance, you will do your job as a gatherer.
Brokerage firms will all claim that they can time the market. God bless them. Some of them can, and that is the problem.
Frankly my advice would be simple – if you have the cash keep it in a liquid fund. Invest 1/3 rd and keep the balance in the liquid fund. If the market goes down another 5% put in the next 1/3rd. The next money should come into the market only IF THERE is a further 10%fall.
If you are a mutual fund SIP investor, keep the good work going…
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