When is the best time to invest in Stock Markets?

Each of us have our own perspective when it comes to timing the Markets! If you look at where the India Stock Markets are right now, some would say the conditions are ripe for a much further move up; while some others would say the valuations are over-stretched and it is better to book profits. Well, to be frank, nobody knows what would happen tomorrow. Our guesses are as good as the toss of a coin!stock-market-investmentSo, where does that leave us?

My experience investing in over a decade says invest regularly. That way you won’t feel left out if the stocks move up; if they go down, your further investments would average out the ones you’ve already made. However, basic common sense would say a developing market like India should pay off in the long term, and that’s what it has done! Nifty50 – a widely tracked index of the Indian Markets – has a CAGR of 11.7% in last 20 years (since 1996) and 7.5% in last 10 years (since 2006). But one has to keep in mind that these are long-term averages, meaning there were ups-and-downs over these years. To put things into perspective, if you had invested a lump-sum amount just before the crash of 2008, your money would have taken a serious beating; but, if you had invested at the peak of the crash, you would have made a killing in the next few years. That’s why the wisdom says invest over time.

One basic mistake is to blindly go by the commentary of Analysts. Many have been advising since long that we are in the over-bough territory. If I had followed their advice, I would have not made record profits in each of the last few months! Though it might sound concerning, most of those profits have come from stocks that already rose a bit and my gut feeling asked me to still go with them. Having said that, I do maintain a balance between investing directly in stocks and also in mutual funds via sip route…the individual stocks might get hammered during tough times, but a basket of them would be relatively better off. It is essentially risk vs reward playoff.

This leaves us with using our best judgment when it comes to investing. If you have a long enough experience in the markets, the call will be relatively easy to make; but if you are a novice, you might burn your fingers initially. Again, that’s where investing regularly over a period of time helps and you learn in the process too!

*Picture sourced from here

Basics to keep in mind while Investing in Stock Markets

stock marketI am a fan of Stock Markets! But when I bring it into my discussions, some people avoid talking about it. The reason – they might have either lost or fear losing their hard-earned money. However, if you ask me, you will never lose sleep if you follow some basic rules.

Here are the ones that I have learned over the years:

  1.       Indulge with your surplus money.
  2.       Do your own research, not go by recommendations.
  3.       Go for quality stocks.
  4.       There can be dips too, maintain calm.
  5.       Don’t get greedy if a stock performs well.
  6.       Never put your eggs in one basket.

Each of them is explained in detail in my post for Money View here.

If you are not invested in the India markets (I like US markets too, but don’t have any exposure here though), you have missed out on some serious money in the last few years. And if you still don’t invest, you will surely miss on much more!

*Money View is India’s No.1 Money Manager app and has one of the top blogs in Business and Finance. Though I am paid to write for them, the thoughts are genuine.
**Image sourced from here

Make hay while the sun shines

There is a lot of money to be made by indulging in the Indian Equity Markets in the next year or so.

I love investing and have been active for about a decade, barring the years I was doing my full-time MBA. It is my firm belief that you would never lose money in the Equity/Stock Market if you do your homework before investing and have patience if things don’t work out well.

What kind of homework does it entail and how things look going forward?

1. Economic Outlook: If you follow financial markets, you would know that we have been experiencing good growth since the Modi-led government took charge of the office. The decision by the Fed to keep low interest rates in the US have only added to the growth. There are some global risks, like Brexit vote in the past and the threat of a sustained slowdown in China, but our domestic factors have insulated us from these risks so far.

A win for Hillary Clinton in the upcoming US presidential elections would further add to this growth, and it is indeed looking a possibility going by the poll numbers.

2. Earnings Growth: Companies have been reporting decent bottom-line growth (profits), more so in the case of small and mid-cap firms. Though the top-line still has to show some improvement, without any major setbacks, the markets would only add to the returns.

Having said that, not every sector will do well (and understandably so), so one has to see where money can be made. Off late, Financial (especially NBFCs) and Auto Sectors have done remarkably well.

3. Domestic Factors: Be it good monsoons, stable economic and inflation outlook, and the recent decision by the RBI to cut the Repo rate, the news has been good all along. There is abundant liquidity in the system, which seems to be only going up.

The economy-friendly policies by the Modi-led government have been adding fuel to the growth engines, the recent being the passage of Goods and Services Tax (GST) bill.

4. Foreign Investments: Foreign Investors have poured in billions of dollars this year, and this is evident in the sharp rise in the markets over the last few months. Since the beginning of the year, BSE Sensex has given over 8% returns. And if you had invested in a handful of strong small or mid-cap companies, you would have easily made more than 20% returns!

If you have never played in the market, this might all seem daunting to you. The best way is to open a Demat account and start investing using the Systematic Investment Plan (SIP) route, where big fund houses would invest on your behalf. Since they have to earn their own livelihood, they won’t disappoint you as well!

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Disclosure: These views are of my own. Investments are subject to market risks, so do a bit of homework before you jump in with your hard-earned money! And never invest all of your savings, and that too in just one fund/stock!

Image sourced from here

Become a Smart Investor today!

We all are very concerned about how we invest our money…and rightly so! At the end of the day, we want to see our money grow. However, at times, our sheer lack of knowledge doesn’t allow us to invest wisely. Sometimes, as the video also shows, we are adamant or superstitious and don’t want to learn the new methods of managing money. So, we go with the traditional forms of investments like Fixed Deposits, Public Provident Fund, without realizing that there are much better options out there with the same level of safety. Financial Markets have grown tremendously over the last couple of decades, and so have the investment avenues – even the safer ones.

My parents too invested in these well-known modes (collectively called Fixed Income or Debt Market) for many decades and also advised my sister to go with them when she started working early last year. However, with my management background and practical experience while working with some of the renowned Investment Banks in the world, I made sure she took the best way – that of investing in the Equity Markets (also called Stock Markets). You might say that that is a risky proposition! Well, only when you look in the short term! If you are a long-term investor and doesn’t worry about short-term hiccups, you would never lose in the market…like I never did! And, I have been playing in the Stock Market since 2003. You only have to do your research well, and hold onto your portfolio in times of distress…that’s what I did during the recent recession.

When it comes to investing in the Stock Market, I would say do not invest directly in the individual stocks on your own unless you have done thorough analysis of the company. This requires all kinds of Quantitative and Qualitative research about the firm. Even when done so, there might still be a chance that the share price might take a hit because of any unforeseen news about the company. Better would be to diversify your investments across stocks (shares) and the best way to do so is via Mutual Funds.

A Mutual Fund (MF) invests in a collection of stocks from a particular sector based on the theme of the Fund. For e.g. I have investments spread across Pharma, Banking, Auto and a few other sectors via Mutual Funds from Birla SunLife, Reliance, and a couple of other fund houses. If you are not sure about any particular sector, invest in a fund that diversifies your investment across Sectors. That way even if one sector is not performing well (say because of Government regulations), your portfolio will not go down much because of the better performance by other sectors. You can also choose to invest in a fund that mimics the standardized fund that trades in the market (like NSE Auto, NSE IT etc). There are many options available based on your interest…you can reach out to an Adviser from the Fund House you chose to invest in.

An important aspect now arises as to when to invest, since you never know if the market is at the peak or bottom. There are many factors driving the markets, from economic policies to the political climate to international regulations, and many others, which keep on changing every minute. An ideal way would be to invest over time, so the averaging effect comes into play. That essentially means that your investments when the market was at peak and bottom will average out, thus not impacting you much. This form of investing is achieved through Systematic Investment Plan (SIP). Majority of my portfolio is via SIP in the funds mentioned earlier. Every month, my Demat account (you need this to invest in markets, banks and fund houses provide it) takes off the specified money from my account and invests in these funds I have purchased.

So, that’s how I have played smart and made money over the years. For best returns, if you are young like me, keep majority of your investments in Equity Markets and a small portion in Debt Markets.

The starting point is to know the basics, or #JanoTohMano as the video says. Once you are ready, a fund house like Birla SunLife can help you out with the rest.