Should You Stop Investing When The Stock Markets Are All-Time High?

I am sure a lot of investors must be thinking they should invest now or not since Nifty has already touched 23,000 – its all-time high.

The problem is not with reaching 23k but this was too fast too soon. From 18k lelevs to 23k. This is an increase of 23.70% in 12 months as of 25-May-24.

Will this sustain the next 12 months also? I feel no. Stock markets usually give a return of 12% a year on average in the long term.

So is a fall imminent? Yes, I can’t tell exactly when that will happen but one thing I can tell for sure is that Nifty will not sustain these kinds of returns in the long term.

So what will happen now? It may fall a bit or go up a bit (the win of BJP is already factored in the markets), but if they lose hell will break. At least a 15% fall is sure.

What’s the best thing to do when the stock markets are at an all-time high?

• Book partial profit in the stocks you hold.For example, if you hold XYZ 100 stocks bought at Rs.50 now at Rs.75 then sell 40 at Rs.75 and keep the 60 stocks in your demat. This is called profit management.If after the election results the stocks you hold go further up it is ok you can book partial profits again but if it comes down you can buy it back or buy some other stock of your choice.
• DO NOT stop your SIPs (Systematic Investment Plans) in either stocks or mutual funds.
• The stock markets will keep increasing forever because some or the other stocks will go up – they will influence investors to keep buying other stocks. This cycle is never-ending. Therefore if you feel like buying more stocks, do buy but make sure you have done due diligence before buying. However, I would still suggest booking partial profits when the stock markets are at an all-time high  – and letting your SIPs continue.
• Stop Derivating trading (Options and Future trading) at least till the General Election 2024 results are out and a few days have gone by. Let things settle down and then trade when INDIA VIX recedes below 17. Right now it is at 21.71.
  It is expected to go up till the 4^th of June 2024 – the day General Election 2024 Results will be out. Wait for a few more days – 5 trading days – then start trading. If you are an exceptional trader then trade with 50% of your normal capacity. The next 15-20 days of less profit will not make much difference to your life. However, increased volatility will be hard to manage if you trade with a higher number of lots. The psychological impact can do the damage, not your trading skills.

Lastly, All-Time-High is just a temporary phase. Stock markets are known to give returns of 12% on average over a decade. But it doesn’t work like a fixed deposit. Stock markets go up and then down. If they do not breach their All-Time-High they will never be able to generate 12% a year on average.

So the final answer to the question – Should You Stop Investing When The Stock Markets Are All-Time High? Do not stop investing. However, if you are scared book partial profits but do not stop your SIPs or the monthly investments to create wealth over the long run.

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