How Much Should You Invest in the Share Market in 2020?
Whenever I meet my friends Jitu and Bharat, they always tell me, “This is the right time to invest in stocks of the share market.”
Investing at Any Time
But after every conversation, I reply, “Every time is the right time to do investment. Even if I become old, it will still be the right time. After my death, it will be the right time for my son Nikunj Shreyank to make use of my Demat account. And then for my grandsons, and so on!
Currently, whatever has been invested is fine with me. I do not want to invest further in stocks of the share market. I will review this decision later.
SitaRam
Key Points to Consider When Investing in the Share Market
When planning to invest capital into the share market, it is essential to keep the following points in mind:
Treat Stock Market Investment as Additional Income
Consider stock market investment as an additional source of income, rather than your primary source of income. This approach allows you to take advantage of the market without relying solely on it for your financial security.
Invest Surplus Capital
Invest only the surplus capital available after meeting all your basic and essential expenses. This includes savings in bank fixed deposits. Ensuring that you meet your basic needs first will provide you with peace of mind.
Decide Your Investment Term
Decide your term of investment based on the capital available to you. Smaller capital per stock requires a longer investment period. One should wait for the stock of interest to test its interim or all-time low with a recoverable reason over at least 3–6 months. Similarly, positions should be held for around 3–6 months for sufficient returns, considering all standard deductions like brokerage, etc.
Avoid Borrowing or Using Necessary Capital
Avoid borrowing or using the capital needed for mandatory expenses for investment purposes.
Rule of 50/50
Allocate 50 percent of your capital to the share market and keep the other 50 percent in your savings account. Whenever a correction occurs, you can use this to invest in other fundamentally strong companies. This strategy helps to balance the risks and rewards of investing.
Check PE Ratio
Before investing, take the time to check the PE (Price-to-Earnings) ratio of stocks. This can provide insights into whether a stock is overvalued or undervalued.
Consult a Financial Advisor
If you are a beginner in the stock market, it is advisable to consult a SEBI registered financial advisor. They can provide guidance and help you make informed decisions based on your financial goals and circumstances.
Opportunities in the Current Market
I believe you should invest as much as possible because it is the right time due to the impact of Covid-19. The market is currently at a lower level, but it is expected to boom after the pandemic.
By following these tips and maintaining a strategic approach to your investments, you can make the most of the current market conditions.