Rishabh is a Chartered Accountant and well-known personal finance expert. He advises Chairmen, Founders, HNIs/CEOs, and Top Executives on personal investment and wealth distribution. He founded NRP Capitals, a firm that, with the assistance of a highly motivated workforce, manages the distribution of financial products to hundreds of clients and assists them in choosing the best ones. He is also the author of the Book titled "Financial Spirituality".
Unlike active investors or traders, mutual fund investors rely on the expertise and convenience of mutual fund advisors to navigate the market. However, as the Sensex reaches new all-time highs, mutual fund investors find themselves contemplating changes to their investments. With the Sensex surpassing 65,000 today, the market's steady rise has created a mix of excitement and reflection among mutual fund investors.
The Sensex: Just numbers, not a destination
Recognising that market highs are merely numbers, not destinations, is crucial. The Sensex has proven its resilience through wars, recessions, and industry fluctuations, always bouncing back stronger. From its humble beginnings at 148 points in 1980 to the recent highs of 65,000, the growth has been impressive. By leveraging the power of compounding, achieving Rs1 lakh in the next 3-4 years and Rs5 lakh in the long term is within reach with a compounding return of 12-15 percent. So, it's advisable to continue with mutual fund SIPs, hold equities, and increase investments because "mutual funds sahi hai."
What are some mutual fund investors considering?
The market's steady increase has sparked ideas of selling and re-entering when a correction occurs, also due to concerns about the El Niño threat to the monsoon, inflation and recession worries, global economic conditions, and other factors.
Attempting to time the market is futile, as even Warren Buffett states, "Forecasts may tell you a great deal about the forecaster; they tell you nothing about the future." Predicting market movements with certainty is beyond human capability. Attempting to outsmart the market is like trying to possess divine powers that only the Almighty has. Therefore, pausing and reflecting before making decisions based on short-term market fluctuations is essential.
Ask the right questions
Before selling and booking profits, consider the following questions:
1) Why did you invest in the first place?
2) Are you a speculator or a long-term wealth creator?
3) What will you do with the proceeds from selling your mutual funds?
If you are achieving your goal earlier than anticipated, such as if you planned on saving Rs1 crore for your children's education by 2024 but have already done so because of the growth in the Sensex, then book profits as the purpose is fulfilled. But why should individuals be concerned about seeing all-time highs and struggling with selling their investments if retirement and education for their children are still 5-10-15 years away?
Embrace the bull and unleash the potential of compounding
Don't let fear dictate your decisions when the market rises to new heights. If you, like me, believe in our country's incredible growth and potential, then recognise our country's enormous potential. Stay invested instead of falling into short-term thinking until your goals are completed, or financial necessities emerge. Concentrate on what matters most to you, whether your job or your business and let the market use the power of compounding to do its magic. Remember that those who stay the course and allow the dramatic story to unfold frequently reap the biggest rewards in both investing and life.
The writer is a Chartered Accountant and founder of NRP Capitals.
The thoughts and opinions shared here are of the author.
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