When is a Good Time to Start Investing in Stock Market
Once people start earning, they also start exploring options to earn some more, and at the same time they look for ways to save some of it for the future. In a common scenario, people tend to put their surplus money in bank deposits to get a relatively higher future return. Others go with other investment options like mutual funds, insurance plans and even invest in assets like real-estate etc.
Saving accounts are low-risk and low yielding. And if you are exploring to take some risk and and get higher quicker returns, then investing in stock market might be your cup of tea. But if you are wondering at which stage of your life should you start trading, the answer is, as early as possible. However to be more specific
- On Receiving your First Paycheck
Once you start earning there are always a number of things you already have in mind to spend your money on. But also, besides spending on your needs and aspirations, you would want to save a portion of it for future use. Like mentioned earlier, while bank deposits give an interest after a certain period, the turnaround time is high. On the other hand, if you are looking to earn some more without a long waiting period, even a small amount is good enough to start trading in stock market.
- Upon Getting a Bonus at Work
If you had been looking for surplus funds to start investing, now is the time. If you have been working for some time, then you already must be having some money saved up in your bank deposits. With this additional money, you are free to try your hand at the stock trading.
- After Selling a Tangible Asset
Selling off a real estate property or a vehicle will come with plenty of cash. Although we won’t recommend using all that right away in the stock market. But yes, depending upon what amount you can spare and would be okay to lose, you can create a stock portfolio for yourself.
- Exiting a Startup
If you have been an investor in a startup or a shareholder team member, then this is another scenario where you might have gained returns on your earlier investments. Now instead of venturing out and putting it in more startups, which is an equally risky business, investing in publicly listed small companies could be a viable option for you.
- Winning KBC
If you become a millionaire by a TV game show, there’s nothing better than that. But jokes apart, if you land in an opportunity where you gain a lot of money, and are looking for places to invest, we need not state the obvious here
All these are possible scenarios of when can one start investing. Having money need not be sufficient to make profitable investments in market, an analysis of market and the stocks is important. This is an advantage that early starters get, since they’re able to test the waters with the little extra cash they have and eventually get groomed better at trading.
Let’s take up a sample scenario, where a person A has just taken up his first job. He works from 9 to 5, and in his following 30-40 year of career, he saves INR 30,000 on an average every month, out of which a lot is spent on personal aspirations like house, vehicle, a couple of holiday trips every year and so on. The few lakhs he would be left at the end of it would not be sufficient to lead on the same lifestyle post retirement. However if this money had been invested in propositions with higher returns at an earlier stage in life the situation would have been different.
It is never too early to start investing in stock market. As long as you have little spare funds and a little know-how of investing, trading in shares could become a smart way of securing your financial future. Once you have decided to invest, there are several online training tools available that can guide you in the right direction.
If you start early then you can leverage the power of compounding.
Compounding is a way of letting your money earn for you. You must have learnt about Compound Interest while in school, where the additional interest at a particular time is dependent upon the renewed amount with previously added interest. Investing in stock market follows almost the same principle.
If you start with a decent amount early then you can achieve even almost 1000x growth if you target a long term investment. This is certainly better than investing in a low return bank savings account.
And hence if you are a professional who has just started earning, besides piling up your savings in a bank, you might want to consider using that money in stock trading to monetize further. The sooner you start, more investment options you can look at.
Short Term v/s Long Term Investments
What might be deterring your decision of investing in the stock market, would be the risk involved in the price of your desired stock falling. However stock market expert and co-founder of TradersCockpit, Amit Sharda says “If you focus on medium and long term financial goals anytime is good time to start, the biggest risk is if you are not invested in markets”
It is true that investing in stock market is a risky game, without the right set of tools even the experienced investors and brokers start to falter. The emphasis on starting early is because you can play a low risk long term game.
While some people swear by the returns from day trading, they also emphasize that it could be done efficiently only with the right skill-set. If you are thinking of going for a short term investment then you need to understand the market that you are entering. And this becomes tough if you are having multiple stocks to look out for in your portfolio. In order to maintain a healthy portfolio, one should have a minimum of 15-20 stocks from preferably different sectors, and tracking them while investing for a short period becomes tedious.
But those who want a swift in and out play, day trading could suit them.
On the contrary, even though long term investments will pay off after a period of time, they lower the risks involved. Once you get acquainted with the techniques involved in analysis of stocks, it becomes an easy game for you. And you don’t have to figure out all on your own, there are several tools available to help you with it, and training portals like TradersCockpit in India, to guide you the right way. So Happy Trading!