The Sensex has retracted from its peak of around 21000, touched lows in the 7600-8000 range and is presently trading in a close range of 9000 in the last few months. Still the crucial question on every investor’s mind remains: “Whether the time has come to start investing again in order to reap the benefits of early bird investing?” But some questions still remain unanswered: Has the market bottomed out yet? Should we wait for some more time before taking a final decision? What if the market rallies from here and we miss out on the run?…

These are questions which a majority of experts and economists have attempted to answer but, time and again, have failed miserably. So what are we as investors supposed to do in such a scenario? The solution is two pronged: Just adopt a wait and watch approach, or invest at regular intervals whenever the market sees a huge fall hoping that it could perhaps be the bottom?

We as investors keep postponing our investment decisions to a later date. But running away from a problem or postponing an important decision is not a solution to the problem. We need to understand that the market does not follow any fixed pattern or trend - even historical trends can’t be guaranteed to follow in future. The market will take its own course and behave in a manner that is either rational or irrational. As investors, be it new or experienced, it is important to understand one thing:

The kind of phenomenal rally we witnessed a year ago was something which proved everyone wrong, and later when the market crashed everyone realized that the market actually follows a pattern of crests (highs) and trough (lows). Only if someone would have reminded us of this age-old reality (when the markets had peaked to its lifetime high @21k); life would have been much happier and the world would have been a better place to live in today. The lesson, therefore, we learnt from the deluge is that exiting the market in time is also as important as entering the market.

However, the question as to whether the time is ripe to (again) enter the market still remains unanswered. This is perhaps a question which is time-tested and can best be best answered by a fortune-teller :). We investors, therefore, just need to follow a few basic and time-tested rules of investing to tide over this conundrum. So get ready to follow a few major commandments - no matter what age group you belong to, which investor category you are from or when you are contemplating an entry into the market. Here are a few very basic rules which you simply can’t afford to forget and thus would serve like a beginner’s guide when it comes to investing in the stock market.

… CLICK HERE for Part 2 of the series …

… CLICK HERE for Part 3 of the series …