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Why this is the best time to invest in equity
Larissa Fernand
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November 12, 2008

If you have never invested in the equity market, probably the best time to start is now. You must have heard the famous and much quoted dictum by Baron Nathan Rothschild: The time to buy is when blood is running in the streets. And right now, those words could not be more apt.

Almost every other day there's some good news that gives the market a boost, only to be followed by some bad news that sends it reeling again. And investors keep waiting on the sidelines to hear some good news before they commit to to putting their money in.

In this context, it would be nice to refer to an interesting piece that appeared last month September in the Financial Times. The author, Anthony Bolton, claims that over the past 35 years as an investment analyst and portfolio manager he has never witnessed such drama as he is now.

And while he agrees that holding ones nerve in such a market is far from easy, his advice is simple: Do not time the market. Ride out the volatility. Do not attempt to dip in and out of your investments.

He also advises investors not to run away from the stock market, a natural reaction at this time. He believes that stock markets tend to rise well before the official data indicates a recovery in the economy. He also is of the view that if you wait for the statistics to confirm an improvement in economic conditions, you will end up missing the bounce in prices that often heralds the start of a new bull run.

In October, Warren Buffet echoed the identical view in the New York Times. He confesses that he had not the faintest idea as to whether stocks will be higher or lower a month -- or a year -- from now. But he was emphatic in his belief that the market would most likely move higher and definitely well before either sentiment or the economy turns up.

The times are bad. Deep stresses remain in the global financial sector, more banks/financial institutions may collapse and a slowdown in the global economy is a given.

Yet, the aggressive action taken by monetary authorities is heartening.  And so are the bargains in the market. Running away during a stock market crash is a bad idea. It is buying stocks when they are cheap that will boost your returns.

If you are opting for a mutual fund, do not look at a thematic or sector fund. Stick to a basic diversified equity fund -- one that will invest in stocks across sectors. And invest via a systematic investment plan (SIP). This way, you invest fixed amounts regularly all through this entire lean phase in the market.

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