I CAN WAIT FOR THE BEST TIME TO GET INTO THE MARKET

Ideally, the best day to invest is the day the markets are at a low. But how do you know which day that is? Only when you have backdated information can you tell the date that was the best to invest in, which is a handy exercise in hindsight. In reality, timing the market is not just difficult, it is quite impossible.

Seasoned investors are those who believe in spending time in the market than timing the market. Instead of waiting for the right date to invest, it is a better idea to make a start anyway, because waiting for the right day can result in your missing out on several good opportunities. There is a way out of this nervousness about investing right away—you could consider ‘rupee cost averaging’ by investing a fixed sum at regular intervals of time. In the case of mutual funds, the systematic investment plan (SIP) has emerged as a perfect instrument for those who want to invest regularly.

When investing through SIPs,

one does away with trying to time the investment and averages the investments. Averaging the investment can be understood from the example of regularly buying an index like the S&P BSE Sensex on the first of every month for three years. In this period, the index would go up or down, but you continue to invest a fixed sum each month to invest, which averages out the price at which you invest in the index.

This approach doesn’t guarantee you the best returns but it does guarantee less stress with your investments. There are phases when such investments may face loss in value, especially when the markets are falling, but rupee cost investing mitigates risk. The idea is to invest regularly and not wait for the right day to invest or a time when you have a lot of money to invest. As much as one looks for days when the markets are low to benefit from subsequent rise, it is also possible that, in the waiting period, one loses out on the best days in the markets impacting longterm RoI (return on investment). ■