Ofcourse, this is the BASICest law of investing, making money and splurginng it on gadgets of your choice be it a sports car, luxury villa or that LV bag. Since the beginning of current Bull Run with Maruti's IPO in 2003, we've undergone 5 painful corrections (Iodex or Move?), BIG corrections and I daresay most retail investors ran for cover thinkinng FIIs would never return to Indian Holy Exchanges. BUT BACK THEY CAME and COME THOU SHALT AGAIN and here's why:
1. You can invest your money in either Risk-free or Risky assets depending on your risk appetite.
2. Since Risk-free assets promises lower and fixed returns, people with higher risk profile run towards risky assets.
3. Equities is a class of Risky asset as you invest in capabilities of an organisation to provide higher returns on activities being undertaken by them.
4. There lies the catch: How do you know people governing risk-free assets would make risk-free investments, as typically there are only three categories of Riskfree assets: Government or Govt Enterprises' securites, Bank FDs or Corporate FDs. With the recent credit crisis, last two have lost their credibility upto some extent though not totally.
5. So those believing in "Don't put all eggs in one basket" continue to invest in multiple asset classes including equities.
6. Therefore, there is a good chance that money would again flow into equities marketrs as people would like to invest some of their money with people who they believe can generate good returns.
Inevitably, its now a matter of "when" and not "why" equity markets will rise. Equities are at all times low and may even test further lows. However, one should remember that good companies continune to attract investor fervour and shall soon see all time highs with their performance speaking for themselves. So, if you believe in some stories, then buy them now and maybe save some dough to buy later -whether it happens at a lower or higher price will only add that 'kick' .
Wish you happy investing, and do let me know whether you agree to my ideas or not, and share other thoughts that you may have on the same.
