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Is it the right time to invest in Indian stock market?
In the stock market, timing is nothing — but time is everything.
It’s not surprising that first-time investors often worry about the timing of their initial stock purchases. Getting started at the wrong point in the market’s ups and downs can leave you staring at big losses right off the bat.But take heart, Fools: Whenever you first invest, time is on your side. Over the long haul, the compounding returns of a well-chosen investment will add up nicely, whatever the market happens to be doing when you buy your first shares.
Don’t waste time
Rather than fretting about when you should make that first stock purchase, think instead about how long you’re planning to keep money in the market. Different investments offer varying degrees of risk and return, and each is best suited for a different investing time.
When will you need the money?
The longer you have to amass your cash, the greater risk you can accept, since you’ll have more time to wait out periods of bad returns.
If you need the money within the next five years, you’ll want to avoid individual stocks and stock-centric mutual funds. If you need the money within the next three years, you should also avoid bond mutual funds and real estate investment trusts (REITs), which can drop if interest rates increase.
On the other hand, stocks are a very attractive option for long-term goals like retirement. The higher returns are simply too good to pass up.
When to sell
Once you’ve decided what to buy, and when to buy it, you’ll next need to decide when to cash out. Since bonds essentially sell themselves when they mature, this question primarily applies to stocks or stock mutual funds.
Some investors believe they can “time” the market, accurately predicting when it will rise and fall. As a result, they counsel selling all your stocks when the market is about to fall, and buying them all back when the market prepares to rise. Unfortunately, if investing were that easy, these same folks would be sunning themselves on beaches in Acapulco, rather than trying to sell their timing methods to other investors.
Granted, when overall economic woes begin to hurt corporate earnings growth, and companies start to flounder, you might consider selling some of your overvalued, lower-quality companies. But beyond that very general scenario, an accurate system for timing the market remains an investor’s pipe dream.
Don’t listen to the noise
Some investors, particularly those keen on technical analysis, study the ups and downs of market graphs to gauge whether investors will take the market higher. For Foolish investors, this is an exercise in futility. Successful investing relies not on monitoring the market as a whole, but on analysing the strengths and weaknesses of individual companies. Whatever the market’s doing at the moment, a buy-and-hold approach to investing is the best way to earn reliable long-term returns.
Review, review, review
Of course, you can’t just load your portfolio with a few stocks — however well-chosen — and forget all about them. Like houseplants, investments need regular care and attention to flourish. Unless you’ve parked your money in government bonds, with their guaranteed rates of return, you need to check on your investments regularly to make sure they’re beating the market — and doing so more substantially and less expensively than other, similar options.
Reviewing your investments, particularly when you may have made mistakes, also offers a crucial opportunity to learn from your mistakes. Everyone makes errors now and then, but most successful investors avoid making the same goofs twice. Set aside time to review your portfolio at least once every three months, if not every week. While you shouldn’t be glued to the computer screen, tracking your investments minute-by-minute, don’t forget them entirely, either.
As i said earlier , timing is not important. Be stock specific and you will gain your financial freedom.
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