Steer clear of these three behavioural pitfalls during bull markets

livemint.com:

Panic selling at all-time highs Whenever markets hit an all-time high, it’s normal for investors to feel uneasy and consider selling equities in anticipation of a fall. But, here is why this maybe a bad idea. All-time highs are a normal and inevitable part of long-term equity investing.

Without all-time highs, equity markets cannot grow and generate returns. Sample this. If you expect Indian equities to grow at say 12% per annum (in line with your earnings growth expectation), then mathematically it means the index will roughly double in the next 6 years, become 4X in the next 12 years, and 10X in the next 20 years.

In other words, the index will inevitably have to hit and surpass several all-time highs over time if it has to grow as per your expectation. For the last more than 23 years, the average one-year return, when invested in Nifty 50 TRI (total returns index) during an all-time high, is ~14%!. So all-time highs in isolation don’t imply a market fall and, in a majority of the cases, market returns have been strong post an all-time high.

To avoid this mistake, stick to your asset allocation and rebalance your equity allocation if it deviates more than 5% from the original allocation. Procrastination in deploying new money When you have new money to invest, but the markets have already gone up, you might feel tempted to time the market by waiting for a correction. However, this seemingly simple decision is more complicated than it appears.