What a small investor may do under this market condition ?

For the last one month markets are doing extremely well. The main reason is that more than $10 billion of foreign institutional investor [FII] money has come in the past seven months only. Also the corporate earning are growing at a compound annual rate of 25% in the next few years.

So my concern is:
1. What a small investor may do under this market condition ?


Small investors in stock market always enter into the market when it is at its peak and exit when the market is at the bottom. But every one should just do the opposite to make money from the stock market.

But the truth is, its impossible to practice ‘Buy Low & Sell High’.

Then is there a solution to this issue?
Yes, there is a solution to this issue and thats is the concept of SIP

A Systematic investment plan [ SIP ] in a good mutual fund is the best option for small investors under these market conditions.

If you differs in this idea, then please tell where can we put our money ?
Now a days, Fixed deposit gives just 7% compound annual interest, and this cannot even cover the inflation rates. That means the inflation-adjusted returns are negative in the case of FDs. In such a scenario, equity is the only asset class that has given a 18-20% return in the long run [ > 5 years ].

Here, investor just need to find a 4/5 star rated mutual funds and start a SIP. The users can make a decision based on MF rating websites like valueresearchonline.com

A SIP allows us to buy more units when the market is low and hence will automatically prevent us from buying more units when the market is high. SIP will help us to control your 2 main emotions – FEAR and GREED.

In the long run, SIP can do Rupee-cost-Averaging. Since we are buying units when the market is up as well as when the market is down, the net average will always be positive. If you do some research in the Sensex, it pretty visible that the markets wont remain at the bottom for long periods. SIP will encourage us to buy units during those periods.

Also at the current market ie when the sensex is at 20,000 every one of us may think "I may wait and buy units during the next crash", but what will you do if the markets are not going to crash in the next few years. Then we may regret our bad decision.

So never try to time the market. But try to stay for more time in the market.
.

Here are few advantages of SIP.

1. Force us to invest irrespective of market conditions
2. Rupee cost Averaging can bring down the average cost per unit
3. Brings Financial discipline in everyones life
4. Enhance the average annual return 
5. Can start with small amounts, even Rs 500 onwards