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Is this the right time to invest in stocks?

Last updated on: September 16, 2010 08:25 IST

Is this the right time to invest in stocks?

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Abhishek Kumar Singh

From quite some time Indian equity markets are  showing great strength. It's almost over a year that markets have moved up and that too without any major falls. No wonder, the Indian markets have been consistently outperforming all the other global markets in this Bull Run.

The total return over the last year has been nearly in a range of 16 per cent to 18 per cent for the large cap companies that make up the two major indices: the Sensex (comprising 30 large cap stocks) and Nifty 50 (comprising 50 large cap stocks).

The world is talking about the Indian markets being highly expensive and overvalued, considering the current movements. Still the indices don't look like giving up the pace.

Click NEXT to read how investors lose money...

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How investors lose money

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One of the major reasons for this run may be attributed to the retail investors. Most of the retail investors were waiting for the correction to come in so that they get an opportunity to enter the market and then make some quick money.

But the markets are still showing good momentum and have already touched the 31-month high of 5700 on Nifty 50 again.

Finally many of the retail investors are giving up waiting any longer for correction and entering the markets after missing most of the Bull Run for so long.

The entry of these retails investors provided the markets the much-needed push at the current levels and taking the markets to new highs.

Click NEXT to read if it is the right time to enter the markets...



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Will it be right to enter the markets now?

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This is the most common mistake which most of the retail investor does and finally ends up losing money.

Timing the markets is the most dangerous thing any investor can do. And despite knowing this fact very well, retail investors commit the same mistake again and again. Finally, they end up losing money again.

If you are planning to invest directly in the equity markets, there are two main things that you must have:

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Knowledge

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You should have in-depth knowledge about equities, the companies in which one is investing and of course the business the company is in to. For this, most of us depend on tips and suggestions from various sources like  brokers, friends or news channels to acquire the knowledge.

Still it is important that you do self-research while taking inputs from the above sources and most importantly trust your instincts.

Time

You should have enough time to track the market on a daily basis. Most of us are too busy in our life to keep a track of the markets daily and thus most of times miss to track the equities we have invested.

Click NEXT to read what yous strategy should be in such a situation....



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So what should you do if you lack knowledge & time?

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If you lack any of the above, you should always choose to invest through mutual funds. They provide you the benefits of investing in equities and also you don't have to invest in time or acquire knowledge to track the companies you have invested in.

In mutual funds, both the things mentioned above are being taken care of by the fund managers of the respective funds and as an investor you don't have the worry of tracking the markets yourself.

Again timing the markets has proven to be the most dangerous strategy and many investors will vouch for that.

So rather than trying to time the markets, the best way is to invest systematically by way of systematic investment plans (SIP).

Systematic investment is simply investing money on a pre defined fixed day of a month and irrespective of the days when the market are bad or good.

This method makes sure that when the markets are down, you buy more units and when the markets are good you are buying fewer units. Thus you don't need to be worried about the markets going up and down.

So do not fret, you too can be a smart investor in equity markets!



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