Soaring markets - What NOT to do!

 Best Practices For a Strong Bull Market

Nifty 50 chart - Monthly time frame.

• Whenever markets hit a new all time, it brings both happiness as well as confusion on the face of investors. Happiness because their portfolio start generating good returns & confusion because they don't know what to do now, add more or book profits?

• I don't have any factual data to say this, but I feel most of the mistakes which investors make, are made at highs or all time highs. They either don't book profits or sell too early. They either keep holding or don't add anything. Its a very much "accident prone area".

• Since Nifty has hit a new all time high after more than one full year, I believe most investors are facing the same condition. Yes it is recommended that investors should always remain neutral no matter what, but its way too harder in practice than it sounds in theory.

• Equities are volatile in nature, they keep hitting new new highs or lows. When they hit new highs investors get happy, when they hit new lows investors are in panic. This is normal in my opinion. We are humans & the most human thing about us are feelings isn't it?

• Problem arises when we allow these emotions to take our investment decisions. Then the balance between greed & fear is lost which usually ends up in chaos. This leads to missing bull runs or staying in bear markets.

Now comes the obvious question, How to avoid it?

Well, Check out the best practices to avoid a trap

DO NOT let the greed take control

• When markets hit new highs, investors often get too greedy with their investments. "Oh the market is going up, let me wait before I book profits". While greed is important for success, too much of anything can lead to a disaster.

• Remember the classic quote from warren buffet? Be fearful when others are greedy & be greedy when others are fearful. You just need to follow this (Of course that doesn't mean you should completely sell your portfolio.. you know what I mean right?). You should try to reduce your risk as much as possible by either restructuring your portfolio or hedging your holdings.

DO NOT run behind the train

• I always say one thing, if you have missed the rally, don't worry, another one will be here in sometime. Just have patience. What people do is that once they feel like they have missed something, they just completely ignore the risk portion & board the plane.

• This is the most dangerous mistake anyone can ever make in the financial markets, if you couldn't come on time it's ok. There are ample of opportunities more to come. If you would force yourself into this & suppose it collapses, what would you do? Be disciplined & wait. 

DO NOT just trust your eyes

• When markets go up with momentum, even the weak scrips, which don't have much strength in price action also start racing with double speed. These include many small companies operating at micro level & majorly penny stocks. Because of the low liquidity the way they run is like crazy!

• Anyone who looks at them can say "yeah, this is bound to go up more". Well, that's exactly where the mistake is made. A rising tide lifts all the boats. Similarly, bull runs put not so worthy companies at very rich valuations which lure more & more people to put their money. So, invest only after doing proper research & not because some xyz company has double in the past 2 months. Beware!

Finally,
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