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Should I Wait For Correction?

I liquidated all my investments in June and am waiting for correction since then. My money in bank account is earning 3.5 per cent. Should I invest right now or should I wait?
-Manjunath

Upon the advice of many people, I liquidated all my investments to book profits by the June-end. Many people like me, are waiting for the Sensex to be corrected, which seems elusive. I am cursing all those who gave 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, depending upon the time when he would be requiring his savings.

In your case, though you have not mentioned how much you have gained from your investments, but 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.

Though we think it is not the best thing to do, but 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. If you think you have achieved that, then you have done well.

Going forward, nobody can tell you with any certainty as to how long will this bull run last. While it is obvious that it isn't going to last forever, trying to put a time frame to it is a waste of time. Therefore, 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. However, if the higher levels of markets are bothering you, which is quite understandable, then you can consider going for balanced funds, rather than pure equity ones at the moment.

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

However, if investing at these levels is bound to give you sleepless nights, then re-think. But remember, whenever you decide to invest, always go through the SIP route and avoid trying to time the market in future.

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