The market hit a new all time high last week, and it is natural for people to wonder if they should do anything differently now that the market has reached such levels.
What you should do really depends on what kind of investor you are. If you are the kind that has never invested in the market, and is asking if this is a good time to begin, then I can tell you with certainty that the best time to invest is when the market is down, not up, and also that this advice is almost impossible for anyone in your situation to follow.
So, for all practical purposes, for you, this time is as good as any to begin investing in the market.
For others like me who have been in the market for longer, and are simply wondering if it is time to book some profits or exit out of the market completely, I can share what my thought process is and then you can decide if it makes sense to you or not.
When I read about the market making all time highs, my first reaction was – sure – all time nominal highs, but not really real highs are they?
I say that because there has been widespread inflation, companies have increased prices, their nominal profits have increased so it is only natural that the index value increases at some point to match those increased nominal values.
To see if this is really the case I took a look at the Nifty P/E levels for the past few years, and here’s a chart based on NSE data.
As you can see the market has been here several times before, and we are not even up to the average of yesteryears which is around 19. So, although the market has made a nominal high, you can’t really say that the market has moved to irrational or that the index is at unjustifiable levels.
For a long term investor like me, I am happy to see the markets do well but this doesn’t prompt any change to my investing game plan right now. I will continue to invest more money, while adding to my cash reserves because I love to deploy the bulk of my money during crashes, but I don’t see myself booking any profits right now just because the market has made nominal highs.