A helping hand from numbers leads to objective opinions and confident decisions!!!

This question begets another one - why not? If one goes by AMFI  data, nearly 26% of equity investments done through mutual funds route get redeemed within 1 year.   Pros I can think of investing in equity mutual fund for at least 1 year: You can still find solace in the fact that your gains (or losses) will be classified by income tax department as long term once you cross 365 days of holding. Other than psychological boost of being classified as a long termer, your tax rate will be lower than most of other income sources There is slightly more than 40 percent chance of securing high returns of above 20%. Contrast this with 10 year holding period – probability of securing 20% annualised ROI is just about 18 percent Not to forget, the highest annual performance delivered by Nifty 500 TRI stands well above 100% while for 10 years, it is about 25% annualized. Investing with one year horizon may get you bragging rights for landing with extraordinary returns   And...

Or to put it in simple English - Is The Market Overvalued, Fairly Valued Or Undervalued? It is nearly impossible to call out the market valuation status as too many variables are involved. But no harm in peddling an opinion, especially if one thinks the said opinion is backed by some scientific explanation. So here I go. Most popular way of valuing markets or any security: The P/E (Price to Earnings) ratio. It has its pluses and minuses but let us not complicate life further and for the time being go with the belief that P/E ratio is the appropriate way to value the market. Invert the PE ratio and you get earnings yield (EY henceforth). A P/E ratio of 20 gives EY of 5%. Nifty 500’s closing P/E on 30th September 2023 was 23.45. That gives markets earnings yield as 4.26%. Though this doesn’t give the faintest idea whether market is undervalued, overvalued or appropriately valued. Until you bring in some benchmark. See, there is no running way from comparing one thing to the other...