As a heavy investor, I strongly believe in the stock market. I believe you are contributing to something of actual value, as opposed to assets whose value is arbitrarily determined (real estate, gold, etc). With the stock market, you're contributing to building capital for companies, who in turn will use that produce something of value and contribute to the GDP.
So yeah, in theory I strongly prefer the stock market. I would like to share two rules with you guys, one that I've always held, and a recent short term one I adopted.
1.) Invest long term:
You won't ever win day trading, week trading, or whatever. Becuase you're given an accurate market value of your portfolio every second, people become very reactionary. Invest and forget about it. Check every 4-6 months to get an idea of your portfolio's performance.
When things drop, don't sell, hold on to it (unless if its something cataclysmic that company X had their only factory destroyed, or they're being charged with money laundering or some such thing. Then sell immediately).
The stock market is a long term game; over several years and decades.
2.) Be very cautious about investing in the local market. The growth over the past three years will not be repeated, and don't invest with the expectation of similar performance.
Stock prices haven't gone up in proportion to economic growth, investment, revenues, profits, or anything. They have just gone up.
And the reason for that is in the beginning of 2012, the stock market opened up and became a massive money laundering scheme for people to clean their illegal finances. And a lot of people took advantage of that and it has served as the driving force behind the KSE's performance for the past three years. People took a lifetime's worth of wealth and poured it into the market; and that is why there was a sudden surge of capital.
And that is precisely the reason you're seeing a lot of volatility right now. The amnesty period of money laundering is over and those who did, are confused what to do next.
Amnesty scheme for stock market | Business Recorder
Looking at the next 2 years, it is quite possible that the index will fall slightly as those wealthy individuls who don't understand the market, have cleaned their money and now want it pulled out. But I am certain (as one can be in these matters) that you won't see the index triple again as it has over the past 3 years
