Should you move your fixed deposit money into stocks?

livemint.com:

Contramoney–The art of gambling: Will Perma Bulls get lucky again this year?. Today, let’s address this question in the context of the current situation. And perhaps draw up some principles on how one can make such decisions in the future.

Let’s work through this bottom-up. First, is there a reason to exit your FDs today? Interestingly, given the competition for deposits, yields on term deposits–including fixed deposits–are lucrative relative to what they have been in recent years. In fact, even on an absolute basis, they are quite attractive, especially for someone who needs a fixed source of income.

So, typically, if you are generally an FD investor, then these would count as good times for you. But let’s talk about why stocks are a pull for your FD money. This is easy to explain in the current context.

It’s called FOMO–the fear of missing out. I am serious. In support, I offer the ironclad Warren Buffett rule: Be Fearful When Others Are Greedy and Greedy When Others Are Fearful.

You see, stocks are hot today. Valuations in the broader market (but not the large caps) are totally out of whack with historical averages. And yet, money is pouring in like never before–being greedy when others are greedy. This approach almost guarantees (unless you luck out) one of two outcomes.

One: worse returns than you expected since the hype has already taken prices sky high. Two: negative returns, if the extremely high expectations of either the company results or of huge money inflows in the markets fall short. So, generally speaking, even if you are a seasoned stock market investor, this is the time to be cautious with how you deploy fresh funds into the market.