When is the right time to start investing? (2024)

I am 25 and have just started working. I am yet to start my investing journey. Should I wait for the equity markets to correct or should I start systematic investment plans (SIPs) in mutual funds?

—Name withheld on request

There is no better time to start investing. It is very difficult to time the markets and although the markets are due for a correction, it would not be wise to wait further. Also, when it comes to SIPs, there is not much merit in timing the markets.

We would suggest you invest in different mutual fund categories. Large-cap funds, flexi cap funds, multi-cap funds (40-60% of corpus); mid-cap funds (15-30%); and small-cap funds (10-20%).

For large-cap funds, we would suggest you invest in index funds as the outperformance of actively managed large-cap funds has come down substantially. For mid- and small-cap funds, we would suggest you to diversify between 2-3 funds to reduce the dependence on the performance of a single fund manager.

We also advise you to maintain an emergency corpus equivalent to 6 months of your salary/ income. This fund can be kept in Liquid or ultra short mutual funds. If you haven’t already, consider taking medical and life insurance to provide financial protection to your family in case of unfortunate events.

Should I add silver ETFs to my portfolio? What kind of diversification does it offer?

—Name withheld on request

Gold and silver are both precious metals and have very low correlation to other asset classes like equities and debt. Silver has higher industrial demand whereas gold is used in jewellery and for investments. Both, these metals are considered to be good hedges against inflation.

Accordingly, we suggest an investor to have 5-10% investment in precious metals. We suggest investments in gold due to various factors like liquidity, high demand, demand by central banks.

For investment in gold, consider investing through sovereign gold bonds (SGBs) rather than the ETF (exchange traded funds) or the physical route. SGBs offer an interest of 2.5% per annum in addition to the capital appreciation on gold. Additionally, the capital gains are exempt from tax if held till maturity.