The Indian stock markets have recorded an all time high with the Sensex touching the 62,245.43 mark in October 2021 for the first time ever since its inception. At the same time, Nifty 50 have hit the fresh all time high of 18,000! As you can clearly see, the Indian stock markets have more than doubled since the unfortunate crash in March 2020 on the back of low-interest rate regime and liquidity. As the stock markets enjoy the status of all-time high, there are several potential questions that might creep into the minds of investors – Should I continue investing in the stock markets? Or should I book profits and wait for correction? Should I keep investing through SIP mode of investment in mutual funds or stop? In this article, we aim to answer these questions for you and provide a better clarity on the Indian stock markets.
One of the biggest advantages of SIP mutual funds is the rupee cost averaging it provides to investors. As a result, investors are able to invest in equity regardless of the market cycles – bullish or bearish. Rupee cost averaging is a concept that enables investors to earn significant returns when invested for a prolonged duration of time. Under SIP mode of investment, an investor ends up purchasing fewer mutual fund units when the markets are high than when the markets are low and vice versa – this averages out the total cost of mutual fund units over a period of time. As it next to impossible to correctly predict the market movements and distinguish the peak in the markets, it is recommended that an investor continues to invest in mutual funds through SIP mode of investment without worrying about market corrections.
However, one should ensure that they invest in mutual funds through SIP based on their risk profile, financial objectives, availability of funds, investment horizon, etc. and not basis the changing market prices. Remember, your attempt to time the markets might prove counter-productive instead of doing any good to your investment portfolio. One needs to accept that fact that stock markets are volatile in nature and the ups and downs are an inescapable part of investing in equities – whether you invest directly on your own or through professional management of a fund manager through mutual fund investments. Hence, investors must strive to continue with their mutual fund investments even when the markets are at their all-time high, as eventually the markets are bound to go up and so are the mutual fund returns.
While in the short run, the stock markets might seem to be touching their peak, but it is very difficult to predict for how long the rally is expected to continue. Hence, redeeming all your mutual fund investments or sitting on a huge pile of cash might not be ideal situations. Remember, investing in mutual funds through lumpsum investment prove disastrous for your portfolio if the markets correct significantly suddenly. On the other hand, investing in mutual funds through SIP might benefit investors irrespective of the market cycles and even if there is an intervening market correction. Happy investing!
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