WEALTH CREATION
When viewed from investment perspective, it is discovered that there are two long term phases of the stock market namely:
Wealth Creation Phase
Wealth Destruction Phase
There are times when speculative activities increase to such an extent that lead to formation of bubbles which increase the fear of burst with each passing day. Risk to our investments increases manifold during such phase of the stock market. I describe such phase as EXPLOSIVE.
To enable investors to identify such phases with higher accuracy, I have designed stock market sentiment indicator tables which are available on page 205-206 of the book "Right Attitude to High Altitude". These tables have been designed with the help of Index PE ratio and country’s GDP growth rates, both are readily available.
As per one of the table (When GDP growth rate is above 6.5%) , the sentiment becomes EXPLOSIVE when Index PE ratio crosses 28. PE ratio of both BSE Sensex and Nifty crossed 28 on 4th Jan 2008 & the market crashed on 22nd Jan 2008. Evidence is available on this website under knowledge centre-a snapshot on creation of wealth. (Past performance may or may not be repeated in future.)
Identification of these phases have now become easy and that too with higher accuracy. You should now practice to align your action by investing at the lower end but after understanding the direction of the journey. You can make this possible by developing the mindset of a true long term investor.
In stock market, timing of the investments is very important in order to create huge wealth. These stock market sentiment indicator tables provided in the book "Right Attitude to High Altitude" help you in doing this with high accuracy.
