With the market in a correction mode, would it make sense to book some profits and wait for a re-entry when valuations are lower?
How would you know when to re-enter? What if the stocks you sell don’t go down and actually go up?
Is it a good time to jump into this correction to invest lumpsum in stocks or should I wait for another few days hoping for a further correction?
Such fine timing is neither possible, nor necessary. You need to invest regularly over the very long term, especially if age is on your side. Also, most salaried employees do not have a large surplus to invest. We have only smaller amounts to invest every month. Timing will not have much of an impact on small amounts over the long term.
Is there any good time, like morning or afternoon and what day of the week is good to buy?
It makes no difference. Such short time differences do not meaning anything. They are random. We need not have a very precise and mechanical approach. Our approach is only to be somewhat disciplined in:
1. Investing regularly
2. In a list of high quality stocks.
3. More or less equally, to avoid deliberate skewness
After that, it is largely a matter of chance which stock will do better than the others. Hence too much precision is misplaced.
The strong bullish sentiments have made me jittery instead of boosting my confidence. I have not invested a single penny in any of the stocks since my subscription because I feel the market is a bubble waiting to burst when the ground realities in the economy will catch up with the markets. Even then I have been proved wrong with each passing day with the market scaling new peaks. Shall I wait for the market to crash and then go for the stocks when their prices have come down?
You are making too many assumptions here, some without basis. How do you know the market is in a bubble? A bubble or even an expensive market is known only on hindsight. Also, after a shock decline, stocks and overall market will always look expensive because they are based on recent low earnings.
Even assuming that the market is “expensive”, what is the connection between expensive markets and returns from individual stocks over the medium to long term? Even in an expensive market, many stocks will continue to do well. It is a common fallacy to confuse between market valuation and valuation of individual stocks.
High quality stocks decline along with the market only in severe bear markets. In normal market declines of 10-20%, many high quality stocks may fall a bit, move sideways and go up again. We shortlist high quality stocks available at reasonable valuation which will beat the market. They will do this by falling less with the market and rising more. Having said that, stocks may go down any time after your purchase, whether they have already run up or not. That is the nature of stocks.
Nobody knows in advance, the kind of returns a stock will fetch. But a company, which keeps growing its revenues and profits, is an exceptional opportunity. Its stock will be a buy at almost all levels. To stay away from such a stock based on your personal opinions of “bubble” and “ground realities of economy” will be a mistake.
Now the market is at all-time high and most of the stocks recommended have also gone up, is it proper time to invest now irrespective of market conditions?
It takes a lot of experience and expertise to 1. understand “market conditions” and then 2. correlate such conditions to the future movement of individual stocks. We do not time the stocks portfolio as a whole because individual stocks may not be correlated with the market movements. When we think a particular stock is overvalued we exit. Also, if we do not find good companies we stay in cash. That is how market condition gets reflected.
What will happen if I start a SIP of stocks blindly irrespective of the market conditions?
You will do well because we will suggest exits as well, not just entries.
