You would have heard of the stock market, and more recently for all the wrong reasons. Indian Markets have plummeted over 70% from its top in last one year. Experts still feel that there is some downside left in the short term. So the question is should you invest in equities now, or hold on?
If you are new to stock market, we recommend that you should first understand the mechanics of a Stock Market. But be forewarned, Stock Markets are risky!
During bull run you would have envied Ram Prasad, who made a killing investing in equities, while in downturn, you had sympathized with Shyam Prasad who got killed because of equities.
We like to buy groceries, apparels and other household goods when the marketers offers discounts. But when it comes to stock market, our consumer psychology goes for a toss. We start thinking of investing in equities when the market is already heated and actually buy when the market has peaked out. Historically, common retail investors are the ones who participate in stock market rally at the fag end. During slump they are left to lick their wounds and sulk about stock markets being too risky.
“Be Fearful when others are greedy & greedy when others are fearful” – Warren Buffett
It is not always possible for a retail investor to time the entry as well as exit from stock market. If you have the appetite for risk, then it makes sense to start investing in large cap equities, now. “The India Story” is still relevant, though the current global crisis will affect India’s Economic Growth, but relatively that growth rate would still be much better as compared to other economies of the world. Its only a matter of time before foreign investments start flowing in again. Equity may give ‘short term pains but long term gains’.
If you feel that you can not track market movements on a day-to-day basis but would still like to participate in equities, consider investing in Equity Diversified Mutual Funds. Here your money is invested in equities but the tracking, monitoring and management of your investments are taken care by the fund manager.
So, if you want to invest some amount with long term perspective, don’t invest that entire amount in one go. Start investing in small proportion of that amount regularly and at frequent intervals. Buy your chosen equity on dips or schedule a systematic investment plan (SIP) in your chosen mutual fund scheme.
Returns immediately after a bear market has been historically much higher than average returns in Equities. So your return on equity investments, made now, would most likely outperform all other asset class returns on a 3 to 5 year horizon.