New to equity? There can never be a better time!
Currently, the market valuations are very attractive. Even blue-chip stocks have become quite affordable. Therefore, this is the best time for investors to enter the equity market.Updated: May 20, 2020 18:48 IST
The Indian markets have crashed along with markets around the world. From a peak of over 41,000 in January 2020, it crashed to under 26,000 in March, before recovering to a range of 33,000 by the end of April. It lost approximately 20% during this phase and we are still unclear about how the immediate future will unfold.
Now, if you are one of those individuals who always wanted to invest in equity but were afraid to lose, or if you were someone who was put off by the high market valuations, you suddenly have an opening you wanted.
Currently, the market valuations are very attractive. Even blue-chip stocks have become quite affordable. Therefore, if you can wait patiently for the next three to five years, this is the best time to enter the equity market . The universal principle is ‘Anything that goes down comes up’ and stocks are no exception. The stocks are expected to begin their rebound journey and some of it already happened in between March 2020 and April 2020.
Also, even though the current situation may look gloomy, certain sectors such as health, insurance, and telecom look promising because of the massive demand that exists in India. Even IT services and e-commerce businesses are expected to gain with a shift in consumer behavior. FMCG businesses, because of their very nature, are going to be least affected. So, these stocks are likely to bounce back sooner than the other stocks.
We must realize that the world is facing an unprecedented crisis. Therefore, a cautious approach in investing is the need of the hour. Instead of choosing random scripts based on hearsay and rumours, a strategic approach would be to minimize risk and optimize gains. Simply put, this is the best time to invest in mutual funds.
For one, mutual funds allow you to invest in funds according to your individual goals, be it tax saving, child’s education, retirement, wealth creation, and more. Second, you can choose to invest in mutual funds that meet your risk appetite. Most importantly, a mutual fund is a great diversification tool, since you invest not in a single script, but spread your investment across an asset class.
Another great route to mutual fund investment is the SIP. Systematic investment in small amounts at regular intervals helps you reduce risk and adopt a disciplined approach to investing. You don’t need to time the market before investing and you automatically get more units when the markets are down. Thus, averaging out the unit cost, and offering you better long-term compounded returns.
So, it looks like your excuses to stay away from equity have run out. But your opportunity to gain from it with a smart and responsible approach has come knocking. It’s time you opened the door!