Time is Precious

When it comes to stock markets, you hear terms like Bulls & Bears, Volatility, Upside & Downside, Targets & Stop Losses, etc. All these terms are related to the movement of the market and they can be very scary for investors who are just starting out in the stock market. So, if you are one of those, have you ever wondered what the right time to dive in the equities is?

While there are many market experts who will tell you all sorts of strategies and hints to start investing and how it’s better to “buy on dips” or “sell on rise”, truth be told – if you are long-term investor who wants to ‘invest’, the best time to start investing is NOW. And when I say now, I mean ‘Any time is a good time to start INVESTING’. This is because investments cannot be timed and the longer you hold them, the better returns they will give you. The best way to invest in stock market without worrying about the market volatility and other downsides is to buy Mutual Funds. Although there is a risk of downside, Mutual Funds help you in hedging your risk.

So today, we’ll speak about the common myth of ‘waiting for the right time to buy mutual funds’
First, we need to learn how Mutual Funds work and how do investors make money in mutual funds.

DON’T PUT ALL YOUR EGGS IN ONE BASKET

‘Mutual Fund’ is basically just what the name says – it’s a basket of investment where you pool in your money with the money of other investors with a common investment objective. These Mutual Funds can be of various types, but here we will talk about stock funds. The main reason to invest in Mutual Fund is because they save you the herculean task of selecting the stocks from the hundreds of listed equities in the stock market. Instead, you can choose your own fund and thus reduce the dependency on ONE COMPANY’S PERFORMANCE.

WHY SELECT MUTUAL FUNDS?

The most important advantages of mutual funds are ‘Power of Compounding’, diversification of assets, transparency of the funds, easy liquidity, variety of stocks/sectors and also the privilege to switch funds within a family.

BULLS & BEARS – STUCK AT A CROSSROAD?

Now that we have learnt why every investor MUST buy mutual funds as a part of their investment portfolio, let’s discuss what the right time to BUY THEM is.

Are you caught in this vicious cycle? Have you ever wondered whether you will make more money if you buy at a lower level or do you look at every upside as a lost opportunity? This is where most of investors make the blunder of trying to find the ‘right time to buy’. This is because stock markets will always move in a circle of upside & downside, and every bull cycle will be followed by a bear cycle. Why are MFs the safe bet then? The first and most important rule to keep in mind is MFs are blessed with the ‘POWER OF COMPOUNDING’. This means that you earn interest on the interest. Due to this super power, no matter when you invest in a mutual fund, there will always come a point when your current corpus will be higher than the amount you invested. So it doesn’t matter what the level of the market is when you buy the fund as long as you are willing to hold the funds for a higher time horizon. Even if you buy MFs at the absolute record high, keep in mind that is it not the apex. The stock market will always keep going to higher levels from the current record, and your investment will always give you higher returns over a period of time.

EVERYONE TALKS ABOUT UPSIDE RISKS – SHOULD I WORRY?

What is upside risk? It is the chance that an asset or investment will increase in value beyond your expectations. Now you have to look at the downside risk to plan which mutual fund to buy as it shows you how the fund has performed in the downturn, but knowing the upside risk can be a huge positive for investors, because it contradicts the theory that every risk is a negative this. Upside risk gives you the opportunity to plan your movement and take a positive risk. So if you are willing to stay put in the mutual funds, this can actually be used as an opportunity to buy more with higher expectations of returns.

STILL NOT CONVINCED?

Think of the mutual fund as a wheel with three gears – time, market movement and principal amount which you invest. All three are interlocked and co-dependent on each other. This indicates that it does not matter at what level the wheel starts rotating, the gears help each other function and will not stop moving as long as you keep all three gears oiled. So there is no better time than the present, to jump right in the pool and swim with the tide!

You can invest in mutual fund or equities anytime you wish to

Start SIP early as possible and get delighted with power of compounding by getting invested for longer duration, The beauty of compounding is that small amount invested regularly becomes a very large corpus so it is always advisable to start investing early from the time you start earning with smaller amount than waiting for large capital to start investing.

Not only SIP you can also invest lumpsum in Mutual funds anytime, their can be couple of scenario where you can invest in MF or Equities like

When stock market is in correction phase or it has reached its bottom.
Commodities like gold is going high.
Real estate and infra is in trouble.
But really can you time market, never it’s really tough.

So to take the advantage of market condition in all situations start investing as early as possible by doing SIP.

Never try to time the market keep your SIP going irrespective of market movements.

Investing through an SIP helps you avoid timing the market.

That’s why Comparte Investment team asks do you have “Nivesh Ki Aadat”.

With this one can say “Mutual Fund Sahi hai”, so let me do Nivesh