Last Thursday afternoon, I received a call from one of my investors. His voice was a mix of excitement and uncertainty.
“I’ve made a profit of ₹20 lakhs over the past five years through my SIPs,” he said. “But now the market is soaring, and I’m thinking about booking some of those profits. I still have a long-term goal of investing for another 12 to 15 years, though. What do you think I should do?”
This is quite a common question when markets reach all-time highs. The gains are real, and the numbers in your portfolio look promising, but there’s also that lingering fear of losing it all if the market takes a nosedive tomorrow. It’s the classic struggle: Should I stay, or should I cash out?
The Psychological Dilemma: What Happens If You Sell?
I began by explaining to him the psychological games our mind plays when markets rise and our portfolios grow. Selling your investments during a market high feels like locking in your gains, but it also opens up a set of new challenges:
- If you sell and the market continues to rise, you might start to regret your decision. It’s natural to feel like you’ve missed out on even bigger profits. Re-entering the market can feel daunting, as the prices are higher, and you’ll fear buying back at the wrong time.
- If you sell and the market goes down, you might feel a sense of satisfaction for having timed it just right. However, this feeling can be misleading. When the market starts dropping, it’s common to wait for it to “bottom out,” but no one can predict when that bottom will come. The fear of re-entering at the wrong moment can make you stay out of the market for too long, missing the eventual recovery.
It’s important to remember that markets are unpredictable. Sometimes they soar higher after hitting new peaks, and at other times they correct sharply. Trying to guess what will happen next is risky and can often lead to emotional decisions that may not align with your long-term goals.
A Journey Through the Market’s Highs and Lows
I reminded him, “You’ve earned this ₹20 lakhs because you stayed invested through both good and bad times. Think back to the periods when the Sensex was highly volatile, dropping more than 5% in a week. Those were tough moments, but because you remained patient and kept your SIPs running, you’re now seeing these impressive gains.”
The point here is simple: staying invested has rewarded you in the past, and there’s no reason why it wouldn’t continue to do so. It’s the steady, disciplined approach that leads to long-term wealth creation. The market will always have highs and lows, but a long-term investor learns to weather those storms, not run away from them.
Managing Anxiety: Adjust, Don’t Panic
If market highs are making you anxious, there’s no need to rush into selling your investments. Instead, consider rebalancing your portfolio. Here’s what I suggested to him:
- If you need cash for short-term goals, such as buying a house, funding your child’s education, or any other near-term commitments, it’s wise to move some of your gains into safer, fixed-income options like bonds or debt funds. This ensures that if the market does fall, you’ve protected the portion of your money that you’ll need soon.
- If your goals are long-term, like retirement, stick to your SIPs. Equity markets are volatile in the short term, but over longer periods, they tend to smooth out. Trying to time the market perfectly is nearly impossible, and most successful investors are those who stay invested, not those who constantly try to jump in and out.
The Value of Asset Allocation
To further ease his mind, I brought up asset allocation. A well-thought-out allocation between equity, debt, and other assets (like gold or real estate) helps manage risk while keeping your portfolio aligned with your financial goals.
Here’s the beauty of it: a solid asset allocation strategy allows you to book profits periodically without the stress of making huge decisions during market highs. For example, if your equity portfolio has grown significantly due to the recent bull run, you could sell a portion and shift it into a safer asset class to rebalance your portfolio. This way, you lock in some gains but still stay invested for the long run.
Final Thoughts
I closed our conversation with this advice: “The key to successful investing is not in trying to perfectly time the markets, but in staying disciplined and sticking to your long-term plan. The market will have its ups and downs, but as long as you stay focused on your goals, you’ll continue to see your wealth grow.”
He listened carefully, then thanked me for the advice. By the end of the call, he had decided to stay the course and trust the process that had already brought him this far.
That’s the thing about investing. It’s a marathon, not a sprint. The markets will rise, and they will fall. But if you keep your eye on your long-term goals, stick to your asset allocation, and avoid being swayed by emotions, the rewards will follow.
And sometimes, the best decision you can make is to simply stay invested.
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