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Timing Markets Is Futile

An investor got into trouble after taking some free advice

Upon the advice of many people, I liquidated all my investments to book profits by June-end. I was waiting for Sensex to correct and now I am cursing all those who gave the free advice to book profits. My money in savings bank account is earning 3.5 per cent. Should I invest right now or should I wait until the bears take over?

-Manjunath

Your case is a perfect example of the fact that it is futile for an individual investor to try and time the market. The best an individual can do is to have an investment time horizon in mind, and invest regularly in different asset classes.

In your case, though you have not mentioned how much you have gained from your investments. You should derive satisfaction from the fact that you booked profits at a time when the stock markets were already well past their previous highs.

When one tries to time the market, the aim should be to buy at lower levels and sell at higher levels, rather than buying at the lowest level and selling at the highest.

Going forward, nobody can tell you with any certainty as to how long this bull run will last. The best approach is still to invest small amounts regularly. Rupee cost averaging will ensure that your losses are restricted even if the markets fall steeply.

Regular investing will average out your costs, while debt allocation will provide stability to your portfolio. And you are likely to earn more than the 3.5 per cent offered by your savings bank A/c.

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