Good day! what, if i tell you, it is a good idea to start investing at the peak of market growth? Think, that i'm crazy? Not at all, and today I will clearly demonstrate, that it really is.
When to start investing?When to start investing?
The market keeps growing and growing. One side, this is good, because. investor capital is growing. Other, there are fewer and fewer options for investing in stocks, because. everything is too expensive.
People, who have not started investing yet, waiting for the right moment, to make a profitable investment, that is, they expect the market to drawdown. At this time, they keep savings in banks at a low interest rate., in foreign currency at negative interest (due to inflation), few invest in bonds. Most don't postpone, but just waiting for a better moment in the stock market without savings.
In fact, start investing in stocks even if the market is at its highs sometimes even better, than to wait and start during a crisis or on a correction. Sounds strange at first, but below I will give a concrete example, which confirms what was said.
Let's take 2 investors: both of them are ready to start regularly investing in stocks for 10 thousand rubles per month. They do not have a lot of initial capital. The first of them starts investing here and now, despite, that the market is now at its maximum growth. The second is waiting for a correction or even a crisis, to start.
Market decline Market decline
Let's admit, the second investor turned out to be right and immediately after, how the first investor started investing, the market began to decline. It continued 6 months and the market fell by 5%. Cumulatively, the drop was 30%. Then the market grew steadily by 5% during a year. An exaggerated example.
If you calculate and compare the incomes of two investors, then the first one will earn more, despite, that he started investing right before the market fell. Its profit will be 72 320 rub. in a year and a half of investment. Profit of the second investor, who started investing at the "bottom of the crisis", will be 36 743 rub. per year of investment.
The first investor's profit is doubled, but in a year and a half of investment. The second investor was waiting for the "bottom of the crisis", therefore, the horizon of its investment is half a year less, and the total profit is half as much.
If we take a strategy to increase investment as the market falls, then the advantage of the first investor will become even greater, because. starting at the "bottom of the crisis" (although it is impossible to guess, where is the bottom) the investor will not be able to increase the investment amount.
Conclusion in, that at the beginning of investing, people usually have little capital, they start small. They usually don't have big savings and reserves.. And as you invest wisely, the reserves gradually grow and the investor's readiness for a possible market fall becomes better.. When such a crisis occurs, the investor takes advantage of this moment and buys many shares of quality companies.. In the long term, this is a multiple growth of the portfolio and a high dividend yield in the long term..
If you start during a correction or crisis, then again the initial data are the same - small capital, start small and no reserves. As the market grows and recovers, capital grows and reserves too. But why are they needed, if the market decline is left behind and further growth is expected? Yes, profitability will be high, the portfolio will be green, but its volume will be many times less, than an experienced and crisis-ready investor. If you start during the correction, then you can miss the opportunity of multiple growth of savings and high profitability in the future.
The only difficulty for the first investor is that you need to have strong nerves., control emotions and psychology, so as not to do stupid things during a market fall, eg, sell everything, when everything is cheap. Also, it will certainly be unpleasant to see huge minuses and a red portfolio during a market downturn.. But it's all a matter of psychology, which should not influence the investment strategy.
Therefore, it is never too early or too late to start investing.. The best time to start investing is right now. Even if the market crashes tomorrow 30%. The main thing is to regularly allocate funds for this and control your emotions..
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