Are you optimistic or fearful?

Thu, 18 Mar Pre-Open

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There are way too many concerns surrounding the markets these days. The global economic recovery is under doubt. Now the war of words between the US and China over Yuan's appreciation has become another issue of concern for investors. Investors also seem bothered about the poor finances of the government. Then, there is the spectre of rising inflation that is creating a bigger hole in household budgets. Not to forget that the overall market volatility is another concern that is sending confusing signals for investors.

In times like these, it sometimes becomes difficult for investors to put proper thoughts to work. Probably you might be having similar thoughts as well. One question that must be cropping up in your mind in these times is - Should I invest now or wait for a correction?

Now that is a very valid question. Investing in a volatile market has its risks. The optimistic mind tells you that stocks can go up from here on, as the India story remains strong etc. etc. But the fearful mind directs you to hold on, as there might be a correction round the corner. And you might get a better price for stocks you have set your eyes upon.

So what should you do?

Well, it depends on what you think is right on your part. Trying to find cheap and good quality stocks and investing in bits and pieces despite the market conditions is a good way to gradually build a large portfolio. It is like investing systematically in a mutual fund in small installments…month after month. Then, if you are not able to find any stocks to invest given the high valuations, it is also not wrong to hold on to that precious cash and wait for your target companies to come down in price.

All in all, whether to invest in volatile markets or wait for correction, will depend on your temperament and the ability to find the right stocks. But you have to be very careful in your stock selection. Buying a 'hot stock' (and there are too many of such stocks these days) because everyone else around you is buying, can be highly risky. While you can still search and find some good long term opportunities even as of now, always remember to double check the background of such companies and their promoters, and their past financial performance.

Stocks that might appear cheap might not necessarily be bought. These have to be studied very carefully before an investment decision is made.