As Indian Economy is Improving is it Good Time to Invest?

There is no good time or bad time for investing. We have to find good stocks at the right price in the market and invest.

Honestly speaking, as the economy is turning around, the stock market is rising and stock have become expensive to buy and I am unable to find enough good stocks at the right price.

Contrary to what most people think, when the economy is in the upswing is NOT the right time to invest. The right time to invest is actually when the economy is in doldrums or shattered - that is when we should have the courage to make massive investments - they will payoff handsomely!

So what shall a person do when economy and markets are booming?

1. Search, find and make humble investments every month in good stock priced right.
2. Deeply and carefully study and shortlist great companies, which are expensive right, to make investments in future, when the market crashes.
3. Accumulate cash - keep ready a war-chest - for that doomsday.

Further Related Reading:

Slide explaining that stock market swings like a pendulum

• How to Find The Fair Price of A Stock?

• It is Far Better to Buy A Wonderful Company at a Fair Price than a Fair Company at Wonderful Price

• Market Is A Pendulum

• You Only Find Out Who is Swimming Naked When The Tide Goes Out

• Value Investor Buys From A Pessimist And Sells To An Optimist

The Consequences of an Economic Upswing

When economies boom, people splurge - an example

When the economy is in upswing, following things happen:

1. Businessmen will earn more profits.
2. As a result businessmen feel more generous and reward their management, staff and workers - who, in turn have more cash in their pockets.
3. Having surplus cash people start spending more - on essentials, luxuries, entertainment, travel, etc.
4. Such spending a large section of people will create more demand for goods and services - will increase the income of many more people.
5. Price of goods, real estate start going-up. None will bother about the slight price-rise as people are relatively comfortable.
6. Companies profits will increase - share prices in the market go up - PE and P2BV ratios will go up.
7. Slowly situations develop for an economic as well as stock market crash.

This is an economic cycle that keeps repeating itself both locally and globally. The length of an economic cycle like this last anything between 7–15 years.

What I said above is very well known - there is nothing great about it.

Knowing this what are we going to do?

This is a more important question!

Do the following:

1. Prepare yourself to ride the boom.
2. Make good money.
3. Don’t Splurge!
4. Be aware that good times do not last for ever.
5. Invest wisely but in small quantities (for shares will be expensive and will be trading at crazy valuations), preserve cash for the eventual crash, and when that happen, unleash the cash to amass all the great companies shares that you wanted to buy but could not because they were expensive.

Conclusion:

The consequences of an economic upswing are more money in the pockets of people, who tend to splurge. Wisdom is in conserving cash and investing wisely for the rainy day and for progress towards financial freedom.