Why it's the best time to invest in stock markets

New Delhi: The stock markets are tumbling down. And our advice to you is this: Don't panic! This is a good time for investors to touch base with some basic rules of investing.

Practice makes you perfect

If you want to enjoy a bicycle ride, you must 'learn' how to ride a bicycle, first, right? And you may fall several times before you finally succeed.

The lay investor who aspires to make money on the stock market tends to just pick up the phone, speak to his stockbroker, buy a stock, and then dream of becoming rich. That's not how rich investors do it.

The rich follow the same principle of 'learning' to ride a bicycle; they first 'learn' to 'invest', by understanding all there is to know and all about the stocks they wish to buy.

Then they take the plunge. Most importantly, they keep practicing.

Stock markets are like supermarkets

When supermarkets reduce the price of the goods and announce a 'sale', customers flock to the store, and buy at a feverish pitch. But when the stock markets reduce the prices of shares and announce a 'crash' every investor rushes in to 'sell' and runs away from the market.

Again, conversely, when supermarkets raise their prices, customers shy away and refrain from buying till the next 'sale'.

But when stock markets announce rising prices, every investor rushes in to 'buy'.

Rich investors follow the same principle of buying as consumers in a supermarket: They buy stocks only when the stock markets crash.

Ask Warren Buffet or John Templeton.

No 'liquid' money

’Investing is knowing your assets'. When you move your money from your bank account in order to `invest' you are putting your money into assets like shares, real estate, deposits, etc.

The rich never keep their wealth in the form of liquid money in a bank account. They always keep acquiring assets while the poor acquire liabilities, which they mistakenly believe are their assets.

In America, acquiring your house through a bank loan on the mortgage of your house is acquiring a liability. The same goes for paying for groceries through a credit card.

In life, what is important is not how much money you `make' but how much of that money you succeed in `keeping' and `multiplying'. The rich know how to keep it because they know how to invest it. Money well invested is money well kept. Good investing is often more rewarding than good earning.

Watch that price

'Real' money is made when you `buy' an asset and not when you sell the ‘asset'. Meaning that the 'price' of the asset when you buy is the sole determinant of your profit on that asset when sold. If you buy that asset cheap, your profit on sale is obviously larger.

The message from the author is simple. Be careful of the price you pay when investing in an asset. Don't rush into buying any investment at any price. Wait till the prices come down the way supermarkets announce sales.

In other words, do as the shoppers do at supermarket sales?