Is it prudent to invest when the market is high?

Team Veye | 06-Jun-2021 market is high

It would come as a revelation that maximum investors lose money due to just a single trait of theirs, timing the market. Also, it is no secret that if you keep waiting for a market correction to start investing you may lose another opportunity.

The golden rule for successful long-term investing is not to worry about timing the market but instead focus on disciplined investing.

It is common knowledge that at any given time there are only two directions where the markets can head, either up or down. At apparent peaks also it remains the same. What would have been a peak some time before might have become a trough now.

Even if we presume that the apparent peak becomes an actual peak in the near term, it means that subsequent levels are going to be lower than the previous. Had we been a disciplined investor, we would not have entered in an all-in position, like in poker, and rather invested systematically with subsequent investments going in at lower levels resulting in a lower average cost and consequently higher profitability as the market progresses in the longer term.

A common fear of investors when the markets have reached a new high is the possibility of a market crash soon after deploying the capital. Some experts at such a stage also advise buying the dip.

But buying the dip requires a high degree of conviction and expertise. The saying “never catch a falling knife “is a good example of things going awry.

Investors might be surprised to learn that the 5-year cumulative returns after declines in the stock market (buying the dip) are lower than the cumulative 5-year return after the market sets new highs.

So, whether you are a newcomer to the stock market or an experienced hand, you can always minimise your risk and have a higher chance of profit by just being disciplined.

Disclaimer

Veye Pty Ltd(ABN 58 623 120 865), holds (AFSL No. 523157 ). All information provided by Veye Pty Ltd through its website, reports, and newsletters is general financial product advice only and should not be considered a personal recommendation to buy or sell any asset or security. Before acting on the advice, you should consider whether it’s appropriate to you, in light of your objectives, financial situation, or needs. You should look at the Product Disclosure Statement or other offer document associated with the security or product before making a decision on acquiring the security or product. You can refer to our Terms & Conditions and Financial Services Guide for more information. Any recommendation contained herein may not be suitable for all investors as it does not take into account your personal financial needs or investment objectives. Although Veye takes the utmost care to ensure accuracy of the content and that the information is gathered and processed from reliable resources, we strongly recommend that you seek professional advice from your financial advisor or stockbroker before making any investment decision based on any of our recommendations. All the information we share represents our views on the date of publishing as stocks are subject to real time changes and therefore may change without notice. Please remember that investments can go up and down and past performance is not necessarily indicative of future returns. We request our readers not to interpret our reports as direct recommendations. To the extent permitted by law, Veye Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss, or data corruption) (as mentioned on the website www.veye.com.au), and confirms that the employees and/or associates of Veye Pty Ltd do not hold positions in any of the financial products covered on the website on the date of publishing this report. Veye Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services.

veye logo

Grab Your Free Report On 5 ASX Dividend Stocks To Buy In 2024

(+61)

SALE IS LIVE

Limited Time Deal:   Over 72% OFF

DIVIDEND
INVESTER REPORT

Dividend-Investor-Report

Each week we cover companies offering a good combination of growth & dividends, maintaining a balance between stable 'cash flow' and risker 'raising stars'. Our guidance helps you choose companies with regular dividends and opportunities for lower-risk capital growth.

  • The best High Yield Dividend Stocks picked by our team of analysts every week.
  • Detailed in-depth Analysis with our expert Recommendations Buy, Hold or Sell.
  • Free Daily Analysis Report to keep up with the latest on what's hot and what's not.
  • Gain instant access to a wide range of Dividend Share Reports, exclusive to members only.
Frequency: Every Tuesday