Persistence and discipline are key to creation of wealth in the long term. Time is your strongest ally in helping your wealth grow multifold.

Neha, aged 24 and working at a media company, came to me and said, "I have been a keen follower of various business channels and have subscribed to a few newsletters as well. My online trading site also gives me a lot of tips. However, my portfolio is down by 55 per cent. I can take reasonable risk as I have no dependents. Can you help me on my equities so that I am able to get the best returns? Considering that there is so much of volatility, I would like to seek professional advice. I would also like to know whether I should be investing in direct equity like I have done in the past or through mutual funds.  Or should I just be investing in the bank fixed deposit?"

Timing the market -- A popular 'myth'
Nobody really knows the peak and trough -- the market operates on macro-economic factors and the unpredictable human sentiment. The two prominent human sentiments which drive the markets are -- Greed and Fear. When the markets tank, panic grips even the most elite investor into take wrong decisions.   

If one looks at aggregate mutual funds or equity data, it is evident that a lot of investments happen near market peaks and investors even pulling out at market lows. Studies on past data of the sensex have shown that it is almost impossible to time the market.  

Ironing out volatility -- staying invested for the long term
Equity investing is inherently risky; most people burn their fingers and swear off the markets until its time for the markets to correct. Time alone can be the saviour in ensuring that the intermediate volatilities are ironed out, cutting your losses significantly. The table below illustrates that investment in the sensex in the long term would lower the probability of loss:

• Invest in equities or equity mutual funds with a minimum 3-5 years timeframe.
• Use direct equity if you have the expertise and the time to track the market regularly.
• Don't invest by market sentiment. It is likely to be opposite of what you should be doing.
• If you are starting off in equities, use mutual funds -- diversified and balanced mutual funds are better options.
• Use the systematic route to create a discipline and also effectively average out the cost.
• Align your equity investments with your key long term financial goals.

A CFA-PGDBA, Anil is the founder & CEO of Right Horizons, an end-to-end investment advisory and wealth management firm.