The first step of wealth creation is to begin investing and often it is the hardest. You are new to investing and you are still a bit sceptical to things and you might even be unsure about the whats and whatnots. One of the most common confusion that you could have at this stage is timing. What is a good time to start investing? The answer could vary depending on the type of investment vehicle you choose. Let’s examine each investment option.
Although various strategies and options are at play when it comes to stock markets, the basic idea is to buy a stock and sell it at a higher price for profit. Here, you should be able to identify and buy at a time where the price of the particular stock is low but is projected to go upwards.
Selecting the type of mutual fund is highly dependent on what your investment goal is. If you are making a lump sum mutual fund investment for a shorter period of time, it could work better for you if you invest when the fund’s NAV is a bit lesser. But if your goal is long term, mutual funds, the power of compounding could offset small time losses to help you with capital appreciation. Hence, the timing doesn’t really matter as long as you do your research and invest in the right place.
At the same time, if an SIP is your choice, then the earlier the better. This is because SIPs take time for wealth creation and even if the fund faces losses earlier, it will only have a minuscule effect on your money as the investment amount is lesser. Not only that, just like with lumpsum investments, SIPs are also considered to offset short term bears in a long time.
National Pension System (NPS) or Public Provident Fund (PPF)
Both NPS and PPF are long term investments and as said above, timings don’t matter with long term investments.
Here, NPS is market-linked but since it’s long term, short term losses could be offset in long term, thanks to economic growth and compounding.
In the case of PPF, the earnings are in form of fixed interest rates and here too, time doesn’t have a role.
In both cases, the earlier you start the investment, the better.
Exchange Traded Funds (ETFs)
ETFs are a type of fund that tracks an index or a sector. Unlike mutual funds, ETFs are traded on the stock market in real time and have higher liquidity. ETFs share the same characteristics of stocks when it comes to volatility and hence, the ideal time to buy them would be when you see a growth potential for the particular ETF in the future.
Fixed deposits (FDs) and recurring deposits
Both FDs and recurring deposits give you profit through their interest. Banks will have fixed interest, and this usually stays stable. Hence, you can start investing any time.
As a popular proverb goes, “The best time to plant a tree was 20 years ago. The second-best time is now.” This is especially true when it comes to starting to invest. No matter what the economic condition is, there will always be an investment vehicle that could work. The key is to do your research and find the right place to start.