Discipline while Investing is the Key to Success

The bull run before the market meltdown during the Q1FY07 was the longest and most sustained rally in the history of Indian equity market. The market seems to have come a full circle and the bulls have brushed-off the beers once again and emerged victorious. To everyone's delight it has taken just three months for the markets to regain the level of highs of 12500 from the low of 9000 in the month of June. The benchmark BSE Sensex and S&P Nifty are now nearing their record levels. Does this imply that stocks are again too expensive?

Although the emerging markets have witnessed a lot of volatility, it has been repeatedly said that India growth story is still growing strong and has the potential to sustain the momentum of the current pull back. The Indian economy is experiencing a paradigm shift, as it is moving away from being an agricultural driven economy to an IT-driven, service economy and such rapid economic growth has boosted the prospects of Indian corporate sector and consequently improved the confidence of global and domestic investors. With the Indian economy looking good in long term and GDP growth rate projected at 8% plus, markets have recognized the potential growth by escalating the stock prices.

Though some feel that the valuation are justified in view of the long-term opportunities that India offers, rest are cautious in their stance. This raises the obvious question, would the current rally be sustainable when considerable amount of buying from the institutional side has already pulled the market up quickly to all time high levels again.

Investors are already wary of their experiences in May and June, when the markets tanked. Unexpected gains could disappear just as quickly as they appear unless there is a workable strategy to help their money grow. There are some dos and don't of investing which if followed religiously could do wonders. Investing is not tricky; it is a simple process that requires planning.

* Instead of looking at the levels of the markets, investors should look to book profits whenever the portfolio has achieved the targeted appreciation levels, or when the investment objectives have been met and not be too greedy and adopt a disciplined approach towards investing.

* There are many investors who often lose sight of their long-term financial objectives in order to fulfill their short-term needs. While at times it may become absolutely necessary to do so, investors need to remain focused on longer-term goals. This can be made possible by analyzing various options rather than rushing to look for easier ways to make money.

* The key for successful investing is of "getting in" & "moving out" at the right time, which is easier said than done. The smart investor is one who enters the market at its bottom or at average levels and leaves the market when it gives the first sign of sinking, and since it is not possible for a common investor to correctly time the market; it is advisable to invest regularly in small amounts irrespective of the market movement.

*The effect of "moving in" at a wrong time i.e. at market peak can be negated to some extent if portfolio is built with longer-term perspective. This is because the market cycles will take care of the intermediate volatility. While portfolio rebalancing and booking profits periodically would negate the effect of moving out at wrong time.

Though markets are on a cyclical high but still there are sizeable opportunities in the market even at current level. What's required now is the focus not on speculative stocks but on those that offer real potential. Studies after studies have shown that equity provide superior returns in longer term. Ride through the market's swings and stay invested and do not forget to book the profits whenever investment objectives are met. If investments are actually guided by the strong fundamentals then certainly it won't pester the rational investors whether the market goes up or down.