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When is the right time to invest?

When is the right time to invest?

First-time investors often worry about when is the right time to enter the market. Initiating an investment at the wrong time would lead you to the path of losses from the very beginning. Delaying the first investment is not advisable. Every day is important. If you delay it further you can lose on the extra returns which you could get if invested on present day.

Indian equity market, being the frontrunner in emerging markets, holds a great opportunity to flourish even more. It is totally dependent on the investor and his choices of investment which either earn him great returns or might just jeopardize his invested capital.

Being a first-time investor, you will be nervous and skeptical at the same time. But it will be fruitful and would definitely earn you good knowledge and make you a “Pro” at investing gradually. To avoid losses in the very beginning, we, at The Capitalist, would suggest to not put a substantial chunk of money in equity or mutual funds initially. Rather, We would suggest investing a comparatively minimal amount of money. This might not fetch you great amounts of profits, but would surely help you gain the knowledge of actual working of the market and its framework.

Before you invest, ask yourself two questions:
  1. What is my time horizon?
  2. What kind of investment I am looking for?

When these two questions are answered, try to match your investment choice with your time as this will avoid unwanted choices which usually confuses the investor.Different asset classes give various kinds of risk and returns and same logic goes with the investor as to what kind of investment strategy they follow as per his/her needs.  A right investment decision is must for any investment to get best returns.

For a short-term goal avoid risky assets. When your time horizon is long, you can always opt for asset class which might have higher risk but good returns. Because, even if the market collapses or is running all bearish for a while, the prices might go down, but then once the market is stable or bullish again, you will earn great returns. If you need money within 1-3 years, you should stay away from Bonds and real estate investment trust (REIT'S), which can drop if interest rates fall.

With those options eliminated you are left with fixed income products like Certificates of Deposits(CDs) or government bonds or treasury bills with duration less than 3 years.On the other hand, stocks are such an asset class which is a very attractive option for long term goals like retirement or some other long term goal. It has the potential to offer superior returns over an extended period.

Investing in any one investment vehicle alone is not enough to build a healthy portfolio.

Diversification is the key to successful returns as it minimizes risk and increases the return potential. It is always advisable to keep churning your portfolio by adding different investment classes. Depending upon the time frame, investor can plan on the stocks to be added to his portfolio, so that even if he wants money, he can sell his stocks and book profit on that investment.

 

Don’t Buy on rumours and sell on News:

"Buy the rumor, sell the news" is something that happens in every market. Sometimes traders trade on the event (rumor). Once the event has happened, the traders dump their positions and the market moves. It's frustrating for investors, hence it's better to have a thorough analysis rather than being dependent on the rumors because it can be detrimental.

Some investors often rely on different types of analysis like Fundamental, Technical and Derivative analysis which is undertaken by research analysts. Fundamental analysis helps in identifying "which companies are doing good" based on analysis of ‘identifying "when to buy"  and "when to sell" ' whereas Derivative analysis deals with "How to Do". Based on the above analysis, investors should take investment decisions. If a person is following fundamentals, he must identify strengths and weaknesses of the company and analyse competitors too.

  • A successful investor is the one who can monitor the market and take right and wise investment decisions accordingly.

Review

When you have too many shares in your portfolio, you need to review them periodically. A timely check would guide you through the portfolio. Regular care needs to be taken to make your investments flourish. If you have invested in some fixed income products or FD's or CDs, you don’t have to worry since it's paying you fixed rate of returns. But, when you have invested in Equities or Mutual Funds or Real Estate Investment Trust(REIT's), there is a constant need to keep a watch.

Reviewing gives you the opportunity, particularly when you have made mistakes, to learn from your mistakes. Set aside some time to review your portfolio every week, if not, at least, every month.

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