Right now, anyone holding stocks must be feeling quite pleased as the index has risen above 1700 points, setting a new record high in decades. This rapid increase has immediately invigorated the investment atmosphere. However, many who did not hold stocks earlier have unfortunately missed out. In this article, we will discuss how to adapt during this bullish market phase.

1. Understand What Type of Investor You Are by assessing whether you prefer value investing (VI) or technical analysis. The strategies and adaptations to market conditions will differ accordingly.

2. Once You Know Your Investor Type, you need to establish an investment strategy that aligns with your investor profile. If you are a value investor, you should adhere to the principles of value investing.

- Determine the fair value of each stock you are interested in.

- If a stock is priced below its fair value, you can still consider buying it. However, if the price exceeds its fair value, it’s wise to hold off on purchasing.

- For stocks that are significantly overpriced, consider taking some profits.

- At high index levels, there are often more stocks priced above their fair value than usual.

- However, if a company is fundamentally strong but slightly overpriced, it may be worth holding onto.

3. For Technical Investors

- Look for stocks with strong technical signals that indicate suitable entry points.

- If a stock is still in an uptrend, continue holding it. Don’t rush to sell too soon. Determining whether a stock is in an uptrend is a technique that varies among investors, and you might choose to use indicators you are comfortable with to indicate trends.

- Keep an eye on when a stock shifts to a downtrend, at which point you should consider selling to take profits.

4. Stick to Your Established System Rigorously. If there’s a sell signal, act on it without hesitation. If you haven’t reached your buying point, don’t buy.

- Most investors tend to get swept up in the rising market, leading to decreased caution and chasing after expensive stocks without a proper strategy.

- High stock prices increase risk, necessitating more careful consideration before making purchases.

- Equally important as buying is knowing when to sell. Failing to sell when necessary can ultimately harm your portfolio.

In summary, the rapid rise of the index presents both opportunities and risks. It can lead to a vibrant stock market with many stocks appreciating in value, potentially allowing for short-term profits. However, investors should remain committed to their principles, whether fundamental or technical, and adapt to market conditions without letting the index level influence their decision-making.

 

Article by Terra BKK Dr. Thanapoom Damraks, CFA.

Email: [email protected]