The Complete Guide to Invest Your Money When the Stock Market is High

It’s that moment again, the stock market is at an all-time high. All the while, you were waiting for the right time to start investing.
But hold on! Don’t get caught up in the euphoria that surrounds you. You rarely know where the market is going to go at any given time. Equities are popular among investors with significant risk tolerance.
The Indian stock market is now trading around all-time tops, but some investors are undecided about whether to stay engaged or sell their existing stock holdings.
At the very same time, they might not want to miss out on potential returns if the market keeps making record highs in the days ahead.
Whenever the share market is at an all-time peak, what should your equity investment philosophy be?

What’s Happening Now With The Indian Stock Market?

Financial experts throughout India are struggling with a growing peculiar contradiction between the epidemic’s destruction and a record-breaking rise in local markets as Covid-19 continues to plague the nation.
While the disparity between epidemic agony and financial-market exhilaration is not unique to India, it has never been so stark.
Bulls argue that the gains are warranted by banking system stimulus both domestically and overseas, as well as evidence that the present virus outbreak is nearing its end and hope that India’s long-term strategic economic prospects will be preserved.

Here are some reasons why the Indian stock market is soaring at an all-time high:

  • There is hope around the vaccination campaign, as there has been no countrywide lockdown and the impact of state-level lockdowns has been minimal.
  • Furthermore, banks, which are viewed as proxies for the economy, did not experience the asset quality catastrophe that had been predicted.
  • India’s $2.9 trillion share market has been boosted in effect by growing demands from international buyers, who have bought $34.9 billion worth of shares in the last year
  • A continuous drop in recorded Covid cases since mid-May, along with the Prime Minister’s determination to avert another national lockdown, has bolstered support for investment growth.
  • According to statistics gathered by Bloomberg, Indian firms have raised almost $4 billion in public offerings since the beginning of the year, putting the very first half of the year on course to be the strongest since 2017.

How to Invest Your Money in this Era of High Stock Market Volatility?

Examine your complete portfolio.

Conditions must have been very dissimilar when you first started building a portfolio at the start of the period. Given the amount of time that has passed, the assessments are likely to have shifted.
It’s possible that the grounds for your stock purchase are no longer valid. The big players may have shifted positions. In this circumstance, sticking with underperformers could result in lost revenue.
So, take advantage of this opportunity to go over your complete portfolio.
Remove any shares that don’t appear to be relevant any longer.

Consider investing in stocks that provide dividends

Stocks can provide an ROI in one of two ways: capital gains or dividend income, which is when corporations split their profits with shareholders.
Dividends are likely to be paid if the organization you invest in is cash-rich, has been consistently earning income, and has minimal overall debt.
Businesses that routinely pay high dividends are less likely to be affected by market turmoil.
Even though the share market is at an all-time peak, you may want to evaluate equities with great economics, a robust dividend payout record, and the possibility to generate profits routinely in the future

Develop a diversified portfolio.

Investing in a diversified variety of assets is the primary criterion for constructing any strategy. This is because it reduces the negative impact if a particular asset underperforms. Diversification occurs across asset classes, industries, and periods.
It’s risky to put all your capital into a business that’s on the rise.
However, it is usually preferable to diversify across sectors, harmonizing market valuation concentration, and hedging the risk of share capital with secure but lower-yielding bonds.

Invest in Blue chip companies

According to professionals, investors should avoid speculating in the market at this moment. While existing assets should be maintained, new long-term investments can be made.
Equity investments, on the other hand, should be made in high-quality businesses that are better prepared to deal with the current economic crisis and are projected to gain a sustainable competitive advantage in the current climate.

Never put your money into something you don’t fully comprehend.

Investing in a complex financial instrument is a blunder you should avoid. Typically, market peaks are followed by fund firms releasing sophisticated products. During this period, you may come across a lot of New Fund Offers (NFOs). These deals might bring in astronomical profits.
However, you should not be lured by the money, particularly if the product portfolio is opaque.

Follow and Use Stop- loss

When investing in stocks, it’s critical to stick to your stop-loss order. It might assist you in reducing your liabilities.
When the value of your shares rises, you should adjust your stop-loss accordingly, or by a predetermined proportion of the stock price, to guarantee that you can secure your profits.
Trailing stop-loss is the practice of progressively changing stop-losses in line with the volatility of the stock price.

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Investing in the stock market is a long-term strategy that can help you reach your financial goals.
Investing in the stock market can be intimidating, especially if you’re just getting started because it appears to be excessively complicated or risky.
A thorough understanding will assist you in getting started and we hope this article helps you in understanding just that.

CA Mukesh Gupta
CA Mukesh Gupta
Mukesh Gupta is the founder and director of Wealthcare. He is Fellow chartered accountant, Certified Financial Planner and Certified Public Financial advisor. He is in financial services industry since 1994. He conducts free money management sessions for corporates and associations on topics related to Personal finance. His previous engagement was with Birla Sunlife group. He regularly writes on topics related to Personal finance and occasionally appear on electronic media.

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