Now that NEPSE index is at its never-charted territory: What’s the best strategy now?

Sun, Nov 29, 2020 6:53 AM on Exclusive, Stock Market,

When I wrote an article around 10 days back (published in on 3rd of Mangsir before the opening bell) that NEPSE index is in the verge of breaking its previous all-time high record of 1881 (an increment of more than 160 points was needed to break the record at that time), I was thinking that it might take around a month (approximately end of Mangsir) to surpass its previous all-time high but in just a matter of 7 trading sessions, it broke its previous all-time high of 1881 (closing) and closed at 1893 on the last trading day of the past week i.e. on  11th of Mangsir. During the day the index went above the level of 1900 but could not close at that level and closed slightly below the 1900 mark. The turnover of more than 7.61 billion rupees is also the highest turnover in the history of NEPSE.

Now that NEPSE has broken all its previous records regarding the index, turnover in a single day, market capitalization, etc after a bearish cycle that lasted for more than 4 years, investors have mixed feelings and are surely thinking about what’s next, what will happen in the coming days, what must be the strategy moving forward, etc.

Some 3/4 months back when I was confident that the bullish journey is about to begin, I started saying (and am quite sure that few other people also said) a catchphrase ‘bajaar dui hajaar’ i.e. the index will reach 2000 because previously there was a catchphrase ‘bajaar hajaar’ i.e. the index will reach 1000, especially during the freefall of NEPSE index from 1632 (last Falgun) because of the pandemic. Therefore, some people might be thinking that it would make new highs continuously for some days till it breaks the psychological level of 2000 (they might be thinking of buying aggressively so that they can make some more profit in the short-term). On the other hand, some people might be in fear that a huge correction is imminent (they might be thinking of selling huge percentage or 100% of their shares). Those who had sold during the time index was at 1700 or 1800 thinking it would only surpass its previous all-time high after some correction might be thinking of buying (re-entering the market). As every individual thinks differently their strategies ahead will also be different. There is a very simple and yet highly effective strategy that many know but do not apply. Yes, you got it right; I am talking about the long-term investment strategy. There is no need of thinking about where the NEPSE index will move if the investment is done for the long-term. It is not necessary that the NEPSE index and the portfolio of a person move in a similar direction. If the investment is done from the perspective of long-term investment, there is no need to always watch or get panicked or excited by the swift movement of NEPSE index. What I want to say is, it’s more important that people watch and give emphasis to their portfolio than the NEPSE index.

Some people prefer long-term investment while some prefer short-term investment, the preference depends on (or is derived from) their knowledge, experience, risk appetite, etc. I would try to write a separate article about short-term trading in the future. In this article, I would like to talk about long-term investment. In the long run, the market will always give handsome returns provided one has purchased shares through thorough due diligence, study and research and applied risk minimization techniques while purchasing shares (long-term investment automatically minimizes the risks to some extent).

One thing that is certain in the stock market is that the market is the supreme; no one can predict the market and no one can time the market. The thing people can do is be well aware of their investment (what shares they are buying, for this proper due diligence, study and research must be done). So, for everyone who wants to try their luck in the stock market, I would suggest a long-term approach at least at the beginning. This is because short-term trading requires experience as the prerequisite virtue.

The future of NEPSE is still very bright in the long run. I believe that if the investment is done for the long term, it is never late to enter or increase the investment in the stock market. Moving forward, one should look at every correction as a buying opportunity and focus on long-term investment. But before making the investment decision, one must thoroughly study and research, do the due diligence, be well aware of one’s ‘risk appetite’ and try to minimize risks on the investments.

Disclaimer: This article is only my opinion and not investment advice, so DO NOT make your investment decisions on the basis of this article. Be cautious before investing money in the stock market as it is you who will have to bear the consequences (both profit and loss) of your investment.

You can read my previous articles about the future journey of NEPSE here:

Rojin Joshi - An avid and optimistic investor