I think this is the most sought-after question. Each time this question pops up in our mind.
Even if we read loads of explanations for this, we still keep on thinking about this question. When the current market is flatulating constantly, this question is obvious.
In my opinion, NO ONE can give you an accurate answer nor let you know the best time to enter the share market. So it is always advisable to start your investment TODAY. Jab Jago tab Sawera !!
Remember: One actual investment done today is far better than only thinking about hundreds of investments and waiting for the right opportunity in the stock market, because actual action fetches the result, not only planning to do so.
Time only travels forward. Today's actions may become tomorrow's success if we take steps with due care. Don't waste time thinking how to TIME the market. Rather Act TODAY. Take the right decision. Start investing.
So now how to start investing in the stock market?
• Direct equity investment is one of the riskiest investments but also one of the most rewarding.
• One should always look at the risk and return correlation when one is investing in direct equity.
• Diversification is a key in averaging the overall risk. Diversify among sectors, themes, and different categories.
• Direct equity portfolio should consist of 12 to 15 different stocks where 70 to 75% of stocks should be of Bluechip stocks and smaller exposure in midcap stocks.
• It is very important to find and buy Solid Proven Businesses for each buy. If you continue to do so even in a falling market or at the Worst of Times have an edge to get a better CAGR Return over a Decade.
• Do periodic profit booking once your targeted profit rate is achieved. And re-enter the good business companies in the dip.
• Always stagger your investment. Go slow. Never ever invest lumpsum in one stock even if the valuations are very attractive.
• Investing in a hundred stocks is not a miracle. The miracle is to find a single such stock that will stand by your side even when hundreds are pulling down your portfolio.
I always advise my clients to have equity exposure through the Mutual Fund route. They are safer in terms of direct risk involved as your investment. The risk gets staggered among
50–100 stocks. You have a fund manager’s expertise and experience and research by your side. So, my advice is always to build a sizable portfolio with equity mutual funds and little exposure to indirect equity that too in good quality blue chip stocks after analysing your risk profile.
Some of the guidelines for investing
• If you are very new to equity, get worried about market fluctuations but still want to ride on the returns from the market then INDEX FUNDS provides you with a way to invest in the stock market that is completely passive. Start your investment journey with index funds.
• It is very important to have different types of asset classes in our portfolio. Never over-invest in a single asset class. Allocate your investible surplus in different asset classes such as cash, equity, debt, real estate, and gold according to your age and time to life goals.
• Everyone has their own experiences in investing. It's good to learn from other's experiences. But self-learning through your own mistakes, patience, and fear will give real learning. So keep learning and relearning through your own experiments in investing.
• Do not expect unreasonable returns from the equity asset class. Set a reasonable return expectation after studying the historic returns. Consider long term returns for equity performance.
• Investing in the stock market proves good or not depending upon person to person. Any fnancial product will work for you when you have a thorough knowledge of that product. And you use that product wisely to achieve your financial goals.
• Be disciplined in investing. Think about the long term. Do not increase your heart beats because of the short term fluctuations in the share market. Don’t make hasty decisions based on these short term fluctuations otherwise, you will not be benefited by the compounding factor in the long run.
• Your emotions can be one of the biggest destroying factors of your wealth. If we don't control your emotions, be it a panic attack or over joyful feeling and take any decision under these emotions your wealth can be destroyed. So always have a steady and composed mind in handling finances.
• Alpha for fund managers are different and alpha for investors may be different because of their behavioural biases. Here the role of the advisor comes into the picture. This is applicable in direct equity too.
• Focus on managing the downside risk of your investment rather than always trying to maximise the returns from the investments. Stop Loss term plays an important role in direct equity. This attitude is very crucial to have sustainable wealth in the longer run.
• Wealth creation is a long term phenomenon. It can be achieved only when the investor keeps on investing continuously and keeps invested for long. Investor’s disciplined approach makes him invest regularly until his life goal is achieved. Don't be disheartened with recent market downfall and stay invested in good businesses.
• The investment process seems to be very complicated when you mess up things together. Keep things simple. Focus on things which are in your hand: saving more, spending less, investing wisely with discipline and focus rather than maximising return where you do not have control.
• Keep yourself away from * FEAR * GREED * COMPLEXITY And you will have peace of mind while handling your finances and investing in the stock market.
• Don't Blame Equity if it disappointed you. Blame yourself for expecting too much from it.
Keep your seat belt fastened and tight in a falling market. Keep invested and keep investing in good sustainable proven businesses. Focus on the long term and never just wait to TIME the market.
Preeti Zende is a SEBI registered Investment Adviser and Fee only financial Planner. She is Founder and owner of Apana Dhan Financial Services, Associate of Insurance Institute of India.