Invest in Time

Quick edit: When will America withdraw their economic stimulus? What will happen if they stop pumping $ 85 billion every month into their economy? Will they actually stop stimulus? Rumor mills and speculation about America’s economic stimulus plans affects every emerging market. India is no exception. One thing is for sure. The show can’t go on in America for too long. Everybody knows that the tough decision has to come and it is merely an issue of “When”. Whenever it happens, it may have a ripple economic impact. But, will it have a ripple stock market impact? Looking at the number of scares that we have already had and reacted to through the markets, one develops serious doubts if the Indian markets have already discounted the event. This week we had one more scare. One wonders when the next scare will surface. Rather than wait for these scares, one should invest into every scare.

iwiz: You don’t need to be a rocket scientist. Investing is not a discipline where a guy with the 160 IQ beats a guy with the 130 IQ.

Invest speak: The best way to understand and rationalize the behavior of the stock market is to look at its history. Let us look at the post second world war behavior of the Dow .After two world wars, traumatic and expensive military conflicts, the depression, a dozen or so recessions, oil shocks, the resignation of a disgraced President and more, the Dow still rose from 66 to 11497. The stock markets don’t wait for good news. Nor are they correlated to the actual flow of good news. Those who profited in the stock market inevitably bought stocks when the news was really bad. The incentive to buy stocks was valuations. While valuations have a fairly consistent pattern of growth and is aligned to the business performance, the same can’t be said of news. News can be bad for a few quarters and completely turnaround later. To wager money on the basis of news flows is a sure shot way of losing it. Because, when the news looks very good, valuations will be least attractive.

istrat: Start to spend more time in the market

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