When to invest?

You must have heard that no time is right or wrong to invest. In some cases it is true and in some it is not.

 

But it is seriously advisable to start investing at your earliest age.

 

 

The earlier you plant a tree you are bound to get its fruits at the right time, when you need it the most.

It might be true that you earn money to spend but people who earn money and then first invest the same before planning for how to spend it have survived the difficult times.

 

After providing for your basic needs, one should always strive to invest adequate money to keep pace with various factors such as Inflation or potential downturn in markets or income.

 

There are different asset classes such as equity, debt, commodities, and real estate. Every asset class might perform better or worse at any given point of time. Further, each of these asset classes might have costly or cheap valuation at some point of time due to economic conditions or various other factors such as demand/supply. If you are able to buy assets such as equities at lower valuations, you might end up with higher gains or if you buy assets at higher valuations you might end up with ongoing losses. However, these may not be permanent losses as long as you book them.

 

Therefore, another rule of investing suggests that you should be investing your money in certain risky assets only when you have capacity to hold on to your investments for longer period.

 

It is difficult for a common man to understand when the asset valuations are cheap and when they are overvalued. Therefore, it should be left to professional experts such as a Fund Manager or a professional Financial Advisor.

Buy when valuations are cheap and sell when valuations are costly

 

As it is not easy or most of the time impossible to perfect the art of timing the markets, it is advisable to invest partial money regularly at predefined intervals.

 

This is also popularly known as SIP (Systematic Investment Plan). It offers the benefit of Rupee Cost Averaging as valuations move up or down.

 

You should also be aware of exiting/switching your investments smartly at regular intervals or as per changing market conditions. Certain asset class say ‘A’ may perform well in condition ‘X’ while it may not perform well in another economic scenario say condition ‘Y’, while the other asset class say ‘B’ may perform better in economic scenario ‘Y’.

 

Therefore, exiting or switching out of your existing investments becomes as important as investing at the right time.

 

Financial experts may help you to manage this through asset allocation strategies.

Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing.

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