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Sensex, Nifty on bull run; what should be your investment strategy?

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While the party is on for investors, an obvious question on everyone's mind, particularly new investors, is: What should be the investment strategy in a bull market?

Sensex, Nifty on bull run; what should be your investment strategy?
Indian stock markets are having a dream run with Sensex and Nifty50 giving around 25.4 percent and 27.5 percent year-to-date (YTD) returns, respectively. While the party is on for investors, an obvious question on everyone's mind, particularly new investors, is: What should be the investment strategy in a bull market?
Markets right now are expensive, said  Prateek Singh, founder and CEO at LearnApp.co, warning that a new investor must not go "all in" (to borrow the poker term).
Speaking to CNBC-TV18.com on the current market trends, Singh said that beginners in markets shouldn’t invest a lump sum amount now.
"Ideally one should invest when the markets are moderately valued, so right now based on PB and PE ratios of Nifty, it is very clear that markets are valued slightly higher. If investors are starting out for the first time then it is best to divide the capital into five parts and start investing a monthly amount. Also, index ETF or an index fund is the easiest way to get started now," he said.
The PB ratio compares a company's market capitalisation, or market value, to its book value and the PE ratio is calculated by dividing the market price of a share by the earnings per share.
Investors while taking the decision should also look at their time horizons.
Short-term investors who want to put money in and get out in a few months should not invest in equities. However, it is an apt time for medium to long-term investors who can stay involved for some time, as financial experts opine.
But above all, it is important to understand that one should never time markets and investments in equity should always be driven by specific needs.
Remember that financial markets are known to be irrational and unpredictable. They give a surprise when most people are least expecting it.
Hence, Singh of LearnApp.co said investors mustn't rely on tricks and spend some time to educate themselves before beginning to invest.
"The biggest risk one takes while investing is that they try to guess where the top is, however, there’s no way anyone can tell when the markets will turn around. The more advanced way of investing is learning investing strategies so one can then book profits as markets turn and re-allocate when markets change. This is better than just holding on for a long period of time. Ideally spending time to understand and learning about markets will work in the long run,” he said.
For those looking to reallocate funds out of equity now, there are fewer options since the interest rates are not very lucrative.
At such times, Vikas Singhania, CEO at TradeSmart said Real Estate Investment Trusts (REITs) and Infrastructure Investment Trust (InvIT) offer good opportunities.
"They are relatively new products and have some price risk, however, the price risk should not be significant if held for a long term. Other than the regular cash flows, they also offer real estate appreciation which is important in inflationary environments. They can be bought on the stock exchange just like stocks and are more liquid FDs,” Singhania told CNBC-TV18.
Disclaimer: The views and investment tips expressed by investment experts on CNBCTV18.com are their own and not that of the website or its management. CNBCTV18.com advises users to check with certified experts before taking any investment decisions.
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