Whenever someone asks , what do you think is a long time horizon from an investment perspective, my answer has been always, time span > 5 years.
Imagine some one who started 'investing for the long term' in 2007 ( that too buying stocks in one go , holding it for 5 years , they would not be so happy now)- The so called long term stocks bought in 2007 most probably would still be in RED.
Now, the questions that may arise are -Does investing in equity really work??. Even a fixed deposit would have helped increase your base amount by 80% before tax. Was it a mistake not to sell off in 2010 rally??. Doesn't it defeat the purpose of long term??
Even a good stock bought in a wrong time may chicken out for a long time and not yield good results. So. how to know whether it is a right timer to buy. Again, a question that cannot be answered so easily.
What's the way out?
1. SIP in Equity mutual fund spread over a greater span ( 36 to 60 months) can diminish the risk.
2. Buying a stock after solid analysis ( this is not fail proof , but helps avoid major glitches) and buying at a time when everyone is panicking .
Any day no.1 is the best option for a retail investor. Simple looking things at times can do wonders.
Imagine some one who started 'investing for the long term' in 2007 ( that too buying stocks in one go , holding it for 5 years , they would not be so happy now)- The so called long term stocks bought in 2007 most probably would still be in RED.
Now, the questions that may arise are -Does investing in equity really work??. Even a fixed deposit would have helped increase your base amount by 80% before tax. Was it a mistake not to sell off in 2010 rally??. Doesn't it defeat the purpose of long term??
Even a good stock bought in a wrong time may chicken out for a long time and not yield good results. So. how to know whether it is a right timer to buy. Again, a question that cannot be answered so easily.
What's the way out?
1. SIP in Equity mutual fund spread over a greater span ( 36 to 60 months) can diminish the risk.
2. Buying a stock after solid analysis ( this is not fail proof , but helps avoid major glitches) and buying at a time when everyone is panicking .
Any day no.1 is the best option for a retail investor. Simple looking things at times can do wonders.
4 comments:
good information for finance
Well said. If you want to be in Stock Market then you need to have very good temperament, patience, great conviction and hard work to maitain the timings of investing and selling.
Hi, I want to know what are the analysis criteria before buying a stock. 3 years back I bought shares of Suzlon for Rs.100.50 now it has dropped down to Rs.20s. Had done lots of analysis then. Now I am scared to buy stocks for long run, believe day trading is best. Can you suggest an ideal criteria set before buying stocks on a long term basis?
Any help is appreciated. Thanks, Durga
Hi Durga,
It is very difficult to educate one on analysis criteria and any analysis has its own limitation.
For a retail investor SIP in equity fund for at least 36-60 month duration should work out well.
Day trading may be the best, if you know the art of it , do it full time and are a professional trader. But yet I have NO experience on trading to advice.
Regards,
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