Wednesday, November 10, 2010

What is the right time to invest in stocks? (For beginners)

Do you always wonder when should you enter in to stock market? Most of people will reply with YES. Even I am also bit scar when I buy stocks. Remember, I am not a trader, I am a pure investor and so, I sometime worry about the future of my picks. Most of us are thinking that they have missed the right time. They entered in to the market when all others have got their share of profit and now, there is nothing left in market.
Many of us believe and follow the tips given on TV or internet, but this could be very dangerous. Giving you my personal example. I bought a stock of one leading Sugar manufacturing company for short term investment, say 3 months. I got the tip from one business TV channel. When I bought the stock, it downed 30 percent within a week. And I was waiting for it to be up again. But it never came up, and as I gathered money for down payment of my house, I had to sell it for the loss.So, my personal advice is, dont follow what your friend says, what TV anchor says or what Online portals swear by. Always have your own research.

So, how do you know when the best time to invest is?

The best time to enter in to stock market is when market is down or whe it is starting to go up.. And the best time to sell the shares is when the market is up or when it is starting to fall.

There are 2 kinds of investors.

1. Who invest on regular basis, Say, 5000 or 10000 every month on selected scripts and continue untill they really need money badly.
2. Who invest lumpsum ammount once, sell the scripts when market is up and then re invest.This is bit risky approach and needs lots of research. But the return is also very good.

If you are type 1 investor, all time is good time for you. Provided, you should park money for at least 2 years. There is less risk and less returns. But some lucky people gets bonus shares and good dividends as a result of their loyalty towards scripts.

For type 2 investors, as I wrote above, enter in to market when it is down or about to go up... and get out of it, when it is on peak, or about to fall. Then park your money in something else, like gold, Short term FD etc, and restrt the cycle again with lots of research. There is more risk, more pain and more gain in this approach.

In times of great uncertainty think with your head and do not make investment decisions out of emotion. The best time to invest in stocks is when the heavy selling is at a climax. Shortly thereafter, all who were fearful enough to sell already have, and rational investors are starting to rush in to buy at bargain prices.

When buying and greed take control, prices go up and those who are still in the game make money. Then it becomes a matter of someday determining the best time to sell, because every market trend comes to an end. Dont worry about the market trneds, if your research is correct.

So, never rely on luck or tips, always do your own research... and you will get sweet fruits of your hard work on research.

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