Let's talk about the Indian markets. The Nifty-50 is on a roll. It is selling for more than 27 times earnings, more than 3.50 times book, and has a very low dividend yield. Despite being volatile, the index is quite pricey.
As usual the talking-heads have been giving their shit cents. They have to remain active you see, otherwise people will forget them soon. They desperately need attention to survive. It's another story that these people have to talk, write, and then seek money from others to pay their bills. Unfortunately, naive investors (or traders should we say?) don't get it, and fall for them.
Here's some unsolicited advice for them. It is not difficult to feed your needs; but quite impossible to feed your greed. Learn to differentiate, and you are on to something.
Investing in stocks is akin to owning businesses. If you started a hardware business in your hometown, would you be looking to exit in a few months or even a few years? Check reasons, and you will find that owning a stock does not mean you should sell in months. There is a business behind each stock. Learn about it, and see if it has good prospects. No one got richer overnight. If overnight is what you like, let me put it this way: You need to put in a lot of years before you can get rich overnight. If you can show patience in your hardware business, you might as well show patience after you buy a Nestle, Maruti, or ICICI bank stock. After all, they are all into some business which takes time to grow in a meaningful way. Participate in that growth story.
The best recommendation I can give to anyone including those self-proclaimed expert stock pickers is that buying the index and getting the market returns is not a bad thing. In fact, it should be a pretty good thing to do. Throw cash each month, irrespective of markets being expensive or cheap, into that index, and keep going for as long as you can. Time will then take care of both returns and risk. Ignore other people's opinions; they need your cash more than you need their advice. Let those shit-heads be.
Of course if you are a stock picker, you could utilize the volatile times to learn about businesses, how they make money in low and high markets, how they allocate capital, what debt they have, their competitive advantages, and so forth. Then wait for the time when others are in a panic mode to make your buy decisions. There will be plenty of such occasions. But to profit from them, you need to learn to wait. The opposite is true when you want to make sell decisions. The irrational exuberance prevailing in the markets is the time to exit if at all you need to exit.
Nevertheless, the real money is made thus: Buy quality stocks which have long term competitive advantages at reasonable prices, and hold them for as long as those advantages are sustainable. Stick with them in bad times and good times, stick with them in expensive and cheap markets. In a decade or two, this strategy should make enough money for you.
And yeah, get rid of that emotion called envy, for it will only make you miserable like my cousin who despite earning well, saving well, and having enough, always finds himself talking about how others are making too much money. For me, he looks like an asshole. My advice to all is, don't be him. Learn to live life because it is fun all the way.
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