• by Arunima SenGupta
• 30 Nov 2020

Things to be Avoided Amidst Markets Trading at Record High

Positive affirmations with respect to the COVID-19 vaccine from top notch pharmaceutical companies, betterment of the Goods and Services tax (GST) collection and enhanced macro data have led to the indices hitting record high back home. Sensex and Nifty have witnessed a record high.

Inconsistent decision making my investors is not just limited to markets going down and crashing but also when markets tend to soar high. Amidst markets trading at record high, investors tend to put aside logic and reasoning and make impulsive decisions to make some quick gains, which leads to certain regrettable mistakes later.

Here are the things that should be avoided while trading when markets trade at record high.

Investors should avoid investing in large numbers. Seeing markets touch the record peak, most retail investors are enticed to invest in bulk. This should most definitely be kept at bay. Instead, investors should focus on investing in a more spaced and staggered manner, making varied investments through all asset classes.

Avoid losing out on quality stocks as markets soar. When markets peak, high quality stocks may seem to have overextended valuation. However one should avoid selling these stocks and buying low valuation stocks. This decision can be the cause of your regret in the future. Sound stocks tend to have benefits like higher risk adjusted returns attached to them and they will always prove to be beneficial to you in the long run.

As the markets touch its peak, investors are tempted to augment their risk appetites and tamper with their conservative risk profiles. However enhancing your risk profile doesn’t necessarily change the amount of risks you can actually stomach. A conservative investor may fail to remain sturdy as markets face an upheaval. Such moves should be avoided.

With markets in a state of euphoria, it is imperative to be aware and cautious of the moves you make. Your focus should be on choosing sound stocks at fair prices rather than picking up low valuation stocks with zero changes in the fundamentals of the company you are dealing with.