With stock indices close to their all-time highs, there is bullishness all around. SIP inflows in mutual funds touched an all time high of Rs 15,245 crore in July. At the same time, a record 30 lakh new demat accounts were opened during the month.
Individuals tend to make their worst investing mistakes in such bullish times. Some, like the DINK couple, get lured into investing in stocks directly. Others increase their allocation to equities in a quest for higher returns.
Many start dabbling in exotic products and risky derivatives. “Investors are being driven by the FOMO (fear of missing out) factor,” says Nehal Mota, Co-founder of wealth advisory platform Finnovate Financial Services. Here are a few common investing mistakes that investors should avoid at this stage.Markets are high, but not overvaluedSTOPPING SIPS BECAUSE MARKETS ARE HIGH While the overall sentiment is bullish, the volatility in the past few weeks and the high level of benchmark indices is worrying some mutual fund investors.
Some of them expect the markets to correct and may have already stopped their SIPs in anticipation. There are several reasons to sell a fund (see box), but the high level of benchmark indices isn’t one of them. Experts don’t recommend stopping SIPs because markets are volatile.
“When you stop your SIPs, you are stopping your savings, which is not a good idea,” says Vidya Bala, Cofounder of Primeinvestor.in. Stopping SIPs can also impact your long-term returns. “Since you cannot time the re-entry, you will lose out on the corrective phase to average on the downside.
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