When is the right time to enter the market? In terms of investments it is always said, that the right time to invest in the market is when one has savings and when one is ready. Which way the market is going? Is it falling down? Will it come up in the future, and if yes, then when? When the market falls, it is the natural tendency of a person to think that it may keep falling in the future and hence the value of investments done at that time might become less. Timing is a game that is tough to win in the financial markets. As it is said, patience is the key to success, that principle is well applied here. Rather than fretting over the right time to invest and when to invest it is now time that investors think on how long one is planning to keep the money in the market and to what extent risk can be taken. It is natural for the first time investors to hesitate on putting one’s hard earned money into falling markets. The main key to successful investing here is the compounding power of the money put in. The compounded returns of the well-chosen investments will always give beneficial and attractive returns. One point should always be remembered. Getting quick rich can always bring in a lot of cash in a very short period of time; but, long term wealth is only created if one stays invested in the market for a longer period of time.
Research only when you are confident about your skills: With the growing awareness of financial markets and on and off trading, people who do not even have basic information of working of financial markets start making assumptions based on one’s own research and thus lands up into heavy losses. One needs to have a deep in depth knowledge on such topics and such people can just make a forecast of returns one’s portfolio can earn. In India, one may observe that common people normally follow the rumours across the markets, where a neighbour, a friend or a relative may advise to invest in so and so assets. This kind of misguidance may lead to one not looking into any other details and just investing into that particular stock since it was referred by someone. In such cases, where one has less or no knowledge on the markets, a financial planner becomes helpful. These professionals can help in shaping the goal and help in choosing the right product according to the risk profile.
Checking your portfolio everyday: The digital world and easy access of information has made today’s people fast and alert towards various updates. Therefore, in case of financial markets, which stock is good to invest, which is bad, what are the other options of investing , what are the initial expenses to be incurred, etc. has given a reason to point out the small flaws through which one may not even end up investing. This is exactly what happens when one checks portfolio returns every day. Is it the right way to monitor the portfolio performance?
Let us take a small example of kids in school. Is their performance is tested every day for each and every subject? Do they keep getting report cards every day, updating the parents of their daily performance? Answer is no and reason is because every day the efficiency may not be the same. Sometimes it may be very high and sometimes it may get a little low. Hence, term exams are conducted at regular intervals to monitor their performance. This is the same concept of portfolio. If one keeps checking the returns every 10 minutes or every day, then even the slightest fall in the value of investments may leave one depressed. Portfolios should be checked around a time interval of 3-4 months so that one can get an idea to whether one is roughly around the target. Monitoring the performance everyday becomes very stressful and can put the investors to a serious disadvantage when it comes to growing one’s wealth over time.
Stick to your way. Do not follow others: This implies asset allocation. Asset allocation is a process by which percentages of a portfolio are allocated to various asset classes like equity, bonds, real estate, etc. In equity oriented portfolios 60% of the assets are allotted to equity and 40% into bonds or debentures. This kind of asset mix is normally a little risky in the short term but very beneficial in the long term. Next is debt oriented portfolio where 40% of the amount is allotted to equity and 60% to debt. The situation is vice versa compared to the latter. Sometimes what happens is when the investors observe the stock markets doing very well they may want to change the asset mix of the portfolio. But one should understand that the portfolio has not been made to beat the market returns, but to achieve one’s goals. It gives proper returns as per what is assigned to one’s portfolio. But changing the asset mix can lead to a shift in goals. Also, one cannot simply copy the portfolio of any other investor. It totally depends upon one’s risk profile and then allocation is done. So better to stick to the portfolio which suits you and your plan.
Delay of purchase of health policy: Most of the people hold this assumption as to why one may need a health insurance policy if one is physically fit and fine. Health insurance provides coverage for the medical costs that may arise due to any emergency. Emergency can end up into lakhs of rupees and also into a huge debt. There is not right age to buy a policy, but sooner it is done the better it is. Moreover, policy is easily available at young age without any medical test done. Even today people assume health insurance to be useless, however at the same time for saving a few thousand rupees one should also think of losing lakhs of rupees during emergency.
These are some of the tips that can be inculcated in one’s investing habits. So this Diwali take a pledge and work on the above mentioned points. With this we wish our readers a very Happy Diwali and a prosperous New Year.