I have read about the high probability of a tech bubble burst in the US, owing to a COVID-19-led economic depression. These factors will affect the prices of mutual funds in November. Given this, how should I smartly invest in mutual funds?
- Harpreet
I wish you are right in assuming so and able to leverage it to your full advantage. But I don't see any basis in all this. This is because markets are unpredictable and guided by different dimensions. I also don't quite agree with what you are saying about the American tech bubble. Because I don't think it is a bubble at the very moment. Only a segment of the market may have the bubble. However, these tech companies are real businesses and making real money. When I compare them with many other services businesses in India, I find them to be relatively cheaper. Even though they are growing at a faster pace, they are not that expensive. These businesses have a substantial competitive advantage. I really wonder whether we can have a quick substitute for G-mail or Amazon services that we use.
If you look at the five dominant technology stocks that people refer to and that actually have substantial weightage in Nasdaq 100 where Indian investors can invest in, they may be slightly overpriced or rich in their valuations but they all are real businesses, making money and growing at a fantastic pace with a substantial competitive advantage, which is difficult to replicate.
Moreover, the successive rupee depreciation benefits Indian investors. But I really don't know how the market will be. Investors get rewarded when they stay invested in equity even during bad times. Also, you should invest only your long-term money. And if you are getting anxious, have an asset allocation plan.
This article was originally published on August 20, 2020.
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