The beauty of regular investing lies in the fact that an investor buys more when the price is less and vice versa, then be it individual stocks or mutual funds.
MUMBAI: Much as the so-called market experts may tell you otherwise, the trick of successful investing is not so much about timing your entry and exit right, as much as the time spent in the market.
Indeed, timing the market is very difficult and even professional investors have a tough time doing it.
Experts would tell you that the time to buy is when the markets are falling. But when prices are falling, it’s psychologically difficult to buy.
Vice versa, a lot of investors enter the market when it is peaking and it is difficult to keep away from going with the herd. The result of all this is that you buy when the market is peaking and sell out when it is going down. How on earth does one predict if the market would dip tomorrow or thereon?
What option do you have, then? Well, turn to your grandfather. The old man was so right when he advised you to keep investing regularly.
And how does regular investing help? The simplest answer seems to be that an investor can keep investing even if he does not have a large amount of money to invest. Also with regular investment, money earmarked for investment does not go towards spending.
What’s more, regular investing brings into play something called ‘cost averaging’.
Say you invest Rs 5,000 to buy 100 shares of A Ltd at Rs 50 per share. Some time later, the price drops to Rs 25 and you invest Rs 5,000 again. You now have 300 shares of A Ltd at an average price per share of Rs 33.33.
You stand to make a profit when the scrip price becomes greater than Rs 33.33. Had you bought as many shares when the price was at Rs 50, you would have made a profit on your investment only when the price went over Rs 50.
The beauty of regular investing lies in the fact that an investor buys more when the price is less and vice versa, then be it individual stocks or mutual funds.
As Benjamin Graham points out in his all time classic The Intelligent Investor, “The investor who permits himself to be stampeded or unduly worried by unjustified market declines in his holdings is perversely transforming his basic advantage into his basic disadvantage.”
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
)
)
)
)
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}