EQUITY IS VOTING MACHINE IN SHORT TERM, BUT A WEIGHING MACHINE ON LONG TERM


Perhaps no other number draws so much attention in middle and upper class India as the number on the Sensex. It just takes 1,000 points here and there for people to change their opinion about the equity markets. Like, when the Sensex declined to the 8,000 levels at the start of this year, everything about the stockmarkets looked uncomfortable and many believed that prices were headed even lower.

And now, when the Sensex is nearing the 16,000 level, the enthusiasm is back and experts are promoting stockmarkets as the place to be in.

See for instance the changing mood of one learned gentleman from a leading global investment house, with the change in Sensex since September last year. And there are many such experts appearing on business channel everyday trying to attract attention using their 'Sensex forecasting' skills, without any repentance for their past forecasting blunders!

For you, the investor, while it is human to go with the tide, some rules of investing don't change simply because the mood in the environment has undergone a change. For instance, equity will always be an asset which provides opportunity for earning but can never give you the comfort of safety. It holds well whether the Sensex is at 8,000 or at 16,000.

You need to ingrain in your mind what the legendary investment guru, Benjamin Graham once said, "In the short term, the market is a 'voting' machine whereon countless individuals register choices that are product partly of reason and partly of emotion. However, in the long-term, the market is a 'weighing' machine on which the value of each issue is recorded by an exact and impersonal mechanism."

So, stop chasing the Sensex. Live sensibly, and invest sensibly.