The market is at dizzying heights breaking one all time high after another and the sentiment is as bullish as can be. These are times to sell and not buy. Our advise to any investor would be to be patient and let “hot” opportunities pass by, but do not buy. Every time it’s the same story being repeated people who are in the markets from sometime will tell everyone around them how much they have made in the past few months and people who were waiting in the sidelines will feel like asses at having passed these opportunities while their neighbours who were quick to act have made the money. The market is driven by two emotions Greed and Fear.
A wise investor is one who is fearful when everyone is greedy and greedy when everyone is fearful. And today everyone is greedy.
Another most repeated phrase is that “this time its different”. Its really not, one would know after it has happened of course but this is just a phrase used by people who do not know the markets well and have been in the markets for a short period of time and have made a killing by being there in the right time and assume themselves experts of the market.
But how do you know that the markets have peaked and the time to buy is past. While no one can judge the peak the signs are really quite simple. Perhaps the best one is that there is generally a euphoria about the markets and everyone talks as if there can never be anything wrong. Plus a very good sign is that when you start receiving for unsolicited tips about which stocks to buy from your wife, colleagues, the grocer all and sundry. People who did not know what the index means start advising on hot tips and invariably this is a sure sign of trouble.
It is advisable to maintain caution and resist all temptations to make a quick buck and not get cowed down by peer pressure to buy. This is the time to wait on the sidelines and not enter the market.
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