Treat the market as thy friend and not thy enemy

This is to all those who were short on the market before the Nifty hit the circut on 18 May 2009....short covering further propelled the Nifty to higher highs. As of 1 June close, the Nifty is at 4549. Those who were short have lost substantial amount of their capital and many have got wiped out...once again.

The current momentum is up both in the short and intermediate time frame.

Listen to what the market is saying. Elliott wave enthusiasts are predicting the Sensex will touch 100,000 in 15 years. Retail investors have once again got interested in the market. FIIs are pumping in money again.

Whether such a scenario of Sensex 100,000 pans out or not, try and FOLLOW the market rather than PREDICT or OUTSMART it. Buy-and-hold doesn't work as timing the market is impossible. THE CAGR (Compounded Annual growth rate) for a buy-and-hold strategy in most cases works out to be less than a Fixed Deposit.

The Nifty started at a base level of 1000 in 1995 and is currently at 4000. The CAGR for this works out to be around 10% before taxes. Can you outsmart the market and make more than 10% CAGR by following buy-and-hold strategy? If yes maybe Warren Buffet needs your help cause he too is facing problems with this strategy.