The stock market is soaring. The BSE Sensex is just a nudge of 750 points away, about a whisker of 2.01 percent, from its all-time high of 36443.90 points. The question is: is this the time to load up on stocks?
PICK AND CHOOSE, SELECTIVELY
Sure enough, you could. At this point in time, investing is best done with an eye on the long-term. First remember, you will not get superlative returns. While stocks are showing great promise on the back of strong inflows into equity, you cannot invest now looking at the rear-view mirror of high returns. Stocks now will give moderate returns.
Second, you have to have a superior stock selecting skill. You will have to position your portfolio well. More on that later in this article. Suffice it to say, there’s plenty happening in the markets, and if you get your foot stuck, your portfolio could get hurt.
DOUBLE CHECK YOUR THEORIES
Stocks are not inexpensive any more. At 25+ PE, stocks are too stiffly priced. You have to be shrewd now when investing at market tops. The best returns are NOT made when the markets are high – they are made when the markets are low.
That’s not to say that the markets are avoidable now, but you have to tread with an eye on the future. Instead, reign in your expectation of a high juicy fat return. In reality, your returns could be more or less in expected levels.
DON’T GET UNNERVED
Wild see-saw-like swings can unnerve you. These days when stock markets unwind, they don’t just correct, they can deep dive. It’s enough to send amateurs scurrying for cover or booking out at a loss and wondering that they have done wrong to their portfolios.
Shrewd investments can help you realize good returns. However, unwise investments can crush those dreams just as easily.
Only a few people are successful when moving money in and out of investment vehicles. Look for solid companies with a long history of good returns and stay on the field.
You can’t invest in the market looking at the past returns. This market is now beyond returns – and is in uncharted territory. Past performance is just a statistic.
SCRUTINISE PERFORMANCE
You have to look at companies that can increase their profits at a faster pace, and that have not been outpriced by the markets. Investigate a company thoroughly now.
See how companies are planning to increase revenues and profits. Companies that show sharp gyrations from their historical growth rates must be investigated into. Gone are the days when you took the reported financial numbers at face value.
If you want to build a solid portfolio that delivers good returns over the long term, you will want to incorporate strong stocks in the consumption field.
In general, some sectors grow more than others. In this market, stocks that are seeing a volume and revenue uptick is the place to be. The big established companies are getting a boost due to GST as business swings their way from non-registered businesses.
BE PREPARED TO WAIT FOR RETURNS
If you want safe stocks to buy and then hold for long term results, find companies that feature these traits. First, you must see proven profit growth over the past few years with an emphasis on better growth in the later quarters. Second, a regularity in dividend payments is a must. Companies that have a high interest cover and low debt are preferred.
When you are searching for the right growth rate, aim for stocks that have a growth rate – higher the norm. However, shy away from those that are very high above the norm.
High-growth stocks, often times, are pricey due to over-demand conditions. But quality comes at a price. And, after you invest, prepare to wait for longer to get returns.
