We are always worried about when is the right time to invest and when is the right time to buy and sell. It can actually be your biggest Investment mistake, read on why.
As an investor we often come across a dilemma about what is the right time to invest in a certain type of investment. Whether it is shares, gold, silver, mutual funds; people often pause and wonder is it a right time to invest in gold, should I buy these shares now, will this mutual fund give me good returns in the future? And so on. In short, all look to time the markets and this is where they make their biggest investment mistake.
Timing the markets is frankly a ‘Myth’ and when I say that I mean for every common investor, or lay investor. The reasoning is pretty simple. If you are a professional investor who invests in various asset classes for a living, be it gold, silver, stocks etc, then you know what you are doing, and you are a seasoned pro when it comes to investments. This includes intra-day traders, brokers, investment bankers, analysts, and so on. But again, if you look at it, it is not an investment per-se, since it is kind of a trade or business you are into. It is your JOB. So if you are one of these, then this post is not for you; and you probably will understand what I mean. If you are a common investor, whose full time occupation is something other than this, then trust me you will never be able to time your investments, be it Indian stock market timing or gold or silver. You will just not be able to do it. Continue reading to understand.
Firstly, since you are not a full-time investor, you will probably lack two things to be able to even come close to timing your investments: First is the Time, Second is the Deep Knowledge. If you will go looking to time your investments, you will end up not investing at all or the move may just back-fire. Also bear in mind, when the economy collapsed, even some of the leading investment Gurus, brokers and Investment experts fell flat on their face as their predictions, expectations, speculations all proved misplaced. So again, if you are not a full-time professional investing and trading money for a living, you are better off, not worrying about timing the markets. So then what do, if there is no such thing as Right time to invest, how do you invest?
The way to go about your investments is by being systematic about it and not speculative. When you say you want your investment to be at the ‘right time’ or you are waiting for the right time to invest, you are actually speculating or just maybe hoping that the day and time you do actually invest, turns out to be great so you earn great returns. But then hope and guess won’t always payoff. So I am not sure about the right time to invest, but I do know the right way to invest and that is be disciplined and stay in it for the long term.
If you have to invest in Gold or Silver, it makes a lot of sense to NOT buy it during festivals like Diwali, when due to the increase in demand, the prices will rise. This is different from timing the markets, this is common sense. When the demand increases, so will the price and it will come down within a week and probably settle down and stabilize at a level, where you will feel your investment was wrong. But it’s not your investment, it is your thinking and manner in which you invest is what is wrong. For Gold you can always, spread your investment budget throughout the year and buy it at different time in a year, some at the start, some in between and some at the end. This way you will average out the costs and the highs and lows won’t affect you much. But also bear in mind that if you buy jewellery then it is not investment. Also if you plan to buy gold and never ever sell it, then it will be a dead asset. To get return on investment you will need to have the cash in hand that your investment generated for you, and that is not possible without selling the asset.
Again, to really see any returns from your gold or silver investments, you will have to wait for the long term and by that I mean around 3-5 years or maybe more before you plan to sell, unless the markets are too volatile and gold sees a sudden rush in prices, like it did a couple of years back. But for now, the prices seem to have stabilized. Also there are various ways to invest in gold like SIP in Gold Mutual Funds, Gold ETFs etc that do not require you to keep physical gold and thus removes the issues of storage and safety since these are stored in demat form in your Demat accounts. You can check here for all the details.
Same goes for shares and mutual funds. Firstly, if you do not know much about the stock markets, don’t look to time your investments or time the markets in India. It has backfired for a lot of people and it will for you too. Firstly get some knowledge and understand how they work and even after that, it is advisable to not speculate or follow tips. Mutual Fund route is better advised since it means that experienced fund managers are handling your money. But again, research a fund’s performance over the last 5-10 years and see how much it has returned even when the markets were volatile. If the performance is stable, opt for it or else look further.
Again, opt for SIP in Mutual Fund, as it will average out your investments throughout the year and this will also reduce the losses in times of volatile markets. Again, it is equity, so it has to be a long term investment for at least 5-7 years unless it is a debt fund. You can get all the information on Mutual Funds and How to invest, here and here.
The great Warren Buffett often says “Investments are Marathons”, where in you do not sprint and reach the end, but you slowly slowly move towards your goals. So don’t look for the right time to invest, but look for the right attitude to invest. It you really want quick returns than you are better off choosing debt options like FDs, NSC, Bonds, Debt Funds etc. Invest Systematically, regularly, over the entire year, and for a long term, and you will get good returns, unless you choose a very very bad mutual fund or buy fake gold. So what is the right time to invest? It could be to start off right now!