Art of Investing in Equities: Buying at the Right Time is Only Half the Story

Never try to predict market peaks & troughs and sell when a stock becomes overvalued

- Rushabh Desai

Investors are often advised to buy equity funds and to stay invested for the long term to achieve optimal returns. However, an equally important aspect—knowing when and how to exit—often takes a back seat or is overlooked.

There is no doubt buying quality equity funds and staying invested in them for the long-term will help generate optimum returns. Surprisingly, this may not be enough to achieve and realize these returns. Eventually, it boils down to when and at what levels one exits in the equity markets, which truly decides the trajectory of the returns.

As per historical data, investors who stayed invested over the long term and sold equity funds during good market conditions at higher levels proved to be more successful in achieving and realizing optimum returns.

Should investors buy at any level in the equity markets?

Ideally, lumpsum investors are recommended to buy at lower levels and exit at higher levels and for systematic investment plan (SIP) investors the starting point does not matter much but are strictly recommended to exit during good market conditions at higher market levels.