What is an Equity Boom?

Share markets are dynamic. They can also become quite volatile, and swing like the ‘Pendulum’ from extreme optimism to unjustified pessimism.

Market Is A Pendulum

When the market is in the midst of an enthusiastic advance, it is called an ‘Bull Run’ or ‘Equity Boom’. During such a phase the share prices soar and the ‘Price to Earnings Multiples’ are unjustifiably high. The market will witness a whole lot of Initial Public Offerings (IPOs) from a few good companies and also from a large number of worthless corporations. Many lay investors enter the market at very high valuations and get trapped.

In short, an equity boom is a bubble about to burst. It will eventually bust.

The intelligent value investor who not only knows knows which stocks are good but also their intrinsic values, may sell a portion of shares bought and accumulated over time at low and throw away prices at a handsome profit.

The ‘Intelligent Investor’ thus is happy both during an ‘Equity Boom’ as well as ‘Bust’ and invariably takes advantage of the juicy opportunities thrown up by the market at regular intervals.