I was chatting with my neighbour, a couple of days back. He is not an equity investor. He was telling that the bull run was not at all justified and the markets are highly overpriced. When there is no change in earnings of companies in the past three months, how can the market shoot the roof?.
Definitely a logical question!!. My neighbour had booked a flat in 2006 for a huge amount of money. The flat would have cost only half of it, had he booked it in 2005. I asked him , when the rent in the place has been stable ( similar to earnings of the shares), how can the market value of house double...( the appreciation he expected on his flat is not happening now..that's another story....).
He did'nt have any answer too. Stocks are definitely expensive now but the flats are more expensive at P/E's exceeding 200!!.
May be , stocks will be driven more by liquidity than the fundamentals like the real estate. So, retail investors should follow a systematic investment plan to overcome the bumpy rides. Don't stay away from equity, but take the SIP route to benefit from volatility....Enter equity only if you can stay for long in the market ...(> 5 years).