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I am 24 years old and would like to start investing in equities. Is this a good time to buy equity funds?
-D. Haider

I am 24 years old and would like to start investing in equities. Is this a good time to buy equity funds?
—D. Haider


You are at the ideal age to start investing in equities. Gains that you make in the next few years will keep compounding for more than three decades before you retire and will add tremendously to your old age prosperity. If you invest Rs 10,000 now and are able to gain 10 per cent till the time you are 60, your investment will grow to Rs 3.09 lakh by the time you are 60. If you do the same at the age of 30, it will have grown to Rs 1.58 lakh. And if you don't start till 40, such an investment will grow only to about Rs 67,000.

Your fears that you may be buying equities at near the top of the market are natural but need to be tackled with clear-headed logical thinking. The hard fact is that it is not possible to time the market.

The market may be at a top from where it will go into a long decline. It is also possible that it may keep rising for years to come. Therefore the right investment strategy would be one that does equally well in either of these possibilities, or indeed in any other situation between these two extremes.

Investing a fixed amount regularly in a small number of well-chosen funds is the likeliest recipe for long-term success as an investor.

At your age a maximal exposure to equities—say between 70 and 80 per cent—is perfectly acceptable. You should refer either to the scoreboard at the back of this issue or to the Value 50 in the October 15 issue. Choose three to four funds that fit your criteria and start investing regularly.

This is definitely a dilemma but one that is easily resolved. In fact, we have had so many queries like yours that we have done a complete cover story (Page 18) on this topic. As long as you keep in mind the basics in our cover story and understand that the right way to invest is to do so regularly and for the long-term, the exact level of the market or the stage of market cycle should matter very little.



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