Is the perfect time to enter the stock market knocking at your doorstep?
No one can truly time the market as it is almost impossible to even think of doing it irrespective of how much experienced an investor one is. Whether you ask - “when is the right time to invest” or “when is the right time to sell your investments in the stock market?” - A truthful answer will remain the same. And the answer is no one knows the exact answer to this question. Every month thousands of people turn to Google to see if now is the time to invest? It’s a loaded question anyhow, especially this year: Where In late Feb 2020, the markets began a month-long decline, finding what investors hope was the pandemic floor on March-end. Historically, it has taken an average of about two years for the market to recover from a crash; this time, it bounced back in almost just 149 days. By the end of August, Sensex and nifty were once again hitting record highs. With the world amid a pandemic, stocks have been on a roller coaster over the last few months. The stock market went from all-time highs to all-time lows and on the recovery plane in just a matter of months.
If you have your money in the stock market, you’ve probably wondered if you should take out your money. And for those who haven’t even started investing, you’re probably wondering if now a good time to invest. However, I can give you an approach that will help you decide when and how to start investing in the stock market. But, before we jump into the approach, let us understand a few basics of the stock market.
1. Stocks are a type of investment just like fixed deposits, real estate, and gold. Through stocks, you get the opportunity to invest in different businesses by becoming a shareholder of that business and every business is unpredictable as it has to go through the market cycle.
2. Investing in the stock market is not about buying few stocks or any particular stock on tips or some trending news item it’s about creating a portfolio of selected stocks from different sectors based on your risk profile and diversifying your investment with your ideal asset allocation.
3. Knowing a different kind of risk of investing in the stock market is a good idea. If you know the risks, you can manage them as well because clarity is power.
We get taught every subject in our childhood and even in college as well, but not Investments. Your first investment in the stock market whether via direct equity, mutual funds, or any other way should be the investment of your time to educate yourself first before starting in it.
These basic points can go endless so let's cut to the chase. The answer to when you should start investing in stocks is exceedingly simple - as soon as reasonably possible, assuming that you are following the financial pyramid approach under your financial expert's guidance and have saved yourself against all the possible life risks. A Financial pyramid is an approach to managing your personal finances with the basic rule of the pyramid to start from the bottom and move up, rather than attempting to address all aspects of it at once. The four levels of the pyramid are (starting from the bottom): protection, savings, wealth building, and speculation. And investing in equity or planning your financial goals comes under wealth building which ideally starts post you climb up the ladder of protection and saving. And if you have crossed those two levels then you can plan your investment systematically and start investing immediately - whether you are 12, 32, or 52 years old. There's almost no way your future self will regret making the decision.