The best time to plant a tree was twenty years ago, and the next best time is NOW. Likewise in the markets too, invest and stay invested for the long term. Serious wealth creation happens only then.
Let me explain some nuances:
- If you see investing in the stock market as owning a business(es), then the right time to invest in always now. Why would you not own a cash generating and growing business?
- By extension it also means that you GOT to stay invested in the market, if you are serious about compounding your investments.
- Over the long term, ‘Time in the market’ beats ‘Timing the market’. So do not obsess on when to enter and when to exit.
- A staggered way to enter the market (ie systematic investing, or spread lumpsums over several weeks) is one way to reduce the fear of not getting the timing right.
- Obsess instead on what to invest. Ensure you are always into high quality stocks with low debt, aligned promoters, consistent return on capital. Also ensure these companies are steadily growing their sales and profits, and keeping their market shares intact.
- Never disturb compounding. if you worry about right time to invest, you will also worry about exits and the worst thing you could do is sell off in panic when markets turn volatile or bearish.
- Volatility is to be embraced. This creates opportunities rather than risk if you are a long term investor. Be a contrarian and buy high quality stocks when there is a fire-sale going in the market. See the image below (courtesy: BSE) on market volatility.
For your good sleep, ensure you have good asset allocation strategy (eg: 60% equity and 40% debt) so that the fear of right timing does not bother you. Use an asset rebalancing strategy to invest more when markets correct. This works by reducing debt and diverting it to equity if equity value reduces. Conversely if equity grows too much you could prune it and add more debt to bring the ratio back to your pre-determined level.
To sum up, stay invested quality companies for atleast 3 to 5 years, ideally 20 years so that compounding creates wealth and financial independence for you.
