Is it a good time to invest in the share market is a very common confusing question in everyone’s minds
We keep evaluating….
Is it a good time to visit Goa/Maldives/Dubai/Sri Lanka?
Is it a good time to talk/call?
Is it a good time to change jobs?
Is it a good time to buy a car?
So, we as humans keep negotiating with ourselves or with others, to get the best-desired results that are agreeable to both of us in our day-to-day life, for everything that has choices and needs to be decided for the common interest.
Is it a good time to invest with respect to your age?
With respect to your age, if you are in your income-earning phase for at least the next 10-15 years and are having risk bearing attitude, and have surplus funds which you don’t require for any of your immediate expenses for the next 10-15years, then irrespective of your age, you should be getting good returns from investment in stock markets.
Is it a good time to invest in stocks now?
Far more money has been lost waiting for a market correction than in an actual market correction- Peter Lynch
It is often seen that investors try to “time” the market waiting for a market correction to invest money. Several times one of the following happens-
· Market doesn’t fall and it continues to rise. They lose patience and left out and eventually invest at a point slightly higher than original. This is often termed as FOMO (fear of missing out) a rally
· Market does fall. However, investors believe market will fall further and hence don’t invest or partially invest. Market however doesn’t fall further and rallies and investors end up investing bulk of their money at a higher point.
Most of the times corrections are short in nature and hence difficult to time. The huge corrections such as Lehman crisis and Covid market falls are typically once in a decade falls. Even these big corrections cannot be timed and one loses off on the big returns one could have made if one were in fact invested rather than waiting in the side-lines for a big correction! Hence the quote by Peter Lynch- Far more money has been lost waiting for a market correction than in an actual market correction
Very rarely does it happen that an investor invests at the bottom of market correction or sells at the top of a market rally. There are many ups and downs but still, the stock keeps growing with average stability. There could be various reasons for the stock to fluctuate including market sentiments.
Right Time to Invest is as rare as hitting six sixers in a cricket over!
Eg, While playing cricket, it is mainly the batsman on the field who faces each and every ball that comes his way. He himself doesn’t know which pace the next ball is going to come. Out of his experience, he hits his best shot possible. He realizes whether he has hit a six, or a four, or is declared out only after actually taking the action, though the reaction comes a little later.
All of us outside the pitch have all the analysis for the way he should have played the shot and the strategy that he should have used but finally, many other factors such as weather, slow or fast pitch, and his experience… are also responsible for contributing to his success in hitting that shot or in his failure to miss it.
Similarly, in the stock market, it is definitely the experience of the Investment Partner that plays a very important role in helping you invest in the right stocks that grow with average stability over a long-term basis. But it depends on many factors such as the market sentiments, the company’s financial health, and identifying and analyzing the right company portfolios. Recently there was the Russia-Ukraine war, and the markets crashed like never before.
When you are invested for the long term, even if any such event shakes up your stock, your stock should survive such shocks and start gaining momentum again only to see some positive returns.
Hence the futility of the effort to “time” the market. Instead, one should focus on a proper asset allocation- equity versus debt ratio, large caps versus small cap ratio and leave the rest to the inherent strengths and characteristics of these asset classes that have been witnessed for long periods of times across cycles.
The answer to the question- When to invest? IS NOW. We love investing in small-cap companies for the long term!
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Tanuja Gupta, Co-Founder StockInvest2Grow.com