Investment School: What is the right time to invest?

What is the right time to invest?

Most investors in their initial days asks the famous question - "What is the right time to invest (or) When can i start investing in markets?". A simple answer to this question is "Anytime is good time for investing provided you have a defined time frame of your investment".

The question should be rephrased as "How long should i be invested to attain my financial goals and How much should invest periodically(SIP) over a longer period of time". Investment over a longer period of time is always fruitful and facts supplement it. Sensex has come along all the way from 100 to 15,000. If you had invested 10,000 rs in infosys ipo in early nineties, you are crorepathi by now.

Follow the simple steps while making/tracking your investment.

1. Don't Waste time

The earlier you make investments, the better are your returns. The compounding rate of return increases with the number of years you are invested. Eg. 10,000 invested for 3 years at 15% return is worth 15000 whereas the same sum invested for 10 years at 15% return is worth 40,000. So do not time the markets to buy at lower levels. It is very difficult to find the bottom of the market.

2. When do you need money?

Decide on when you need the money down the line. For anything less than 5 years, do not go for stocks or equity mutual funds. Equity should be considered only for a longer period of greater than 5 years. For short to medium term investment , go for debt instruments

3. When to sell?

After you had made your investment, you should decide on when to cash out to meet your financial goals. There are two scenarios where in you can redeem your investments.

1. When your financial goals are met.
2. When the investment in stocks/mutual funds become overvalued.

4. Don listen to rumours

Do not redeem your investment going by the rumours in television and stock market of a correction or a crash. Take your decision on your own.

5. Consistent Review

The job is not done just by investing. One should always keep monitoring his/her investments in a regular basis and should take a decision based on the review.Do not churn the portfolio too often.

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