Mr Market is telling us that there are no other investment alternatives. Other investment classes are simply not seen as attractive. Today, risk-taking is seen as a compulsion. This is driving investor anxiety up at a higher pace never seen before.
Broad-based retail participation in Indian equities is at an all-time high. Good investment ideas are getting disproportionate valuation rewards. Recency bias continues to drive the markets. Investing seems too obsessed with past success. This is certainly stopping investors from thinking beyond the present. What worries seasoned market watchers is that investors are getting more anxious, displaying a lack of happiness, and are unwilling to limit risk. Such traits are not good for the investor’s long term wellbeing.
As markets grow irrationality faster, investors need to find the right behaviour to counter it. How an investor counters such irrationality will determine his longevity in equity markets.