Stock Market: Is this the right investment opportunity for investors in the midst of a big fall in the market? Here we have told what should be the right strategy of investors in such times.
Stock Market Investment: There is a continuous downtrend in the market. There is no way to predict where the market will go. However, by investing under the right strategy, a good profit can be earned from the market. Investors should avoid taking any kind of decisions by panic at the time of market downturn. Due to the pandemic, the habit of saving has increased among the people. People cut their expenses, due to which the supply of raw materials and commodities fell and the supply chain was affected. This led to a rise in prices and an increase in inflation. Also, the economy has also been affected due to the Russo-Ukraine war. Due to many other reasons including Corona epidemic, fear among investors is also increasing continuously.
In the midst of this huge fall in the market, is this the right investment opportunity for the investors? Let us know what investors should do in such times and what should be their right strategy.
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can learn from history
According to Hartford Funds, there have been 26 bear markets since 1928. At the same time, the bull market has been 27. The stock falls an average of 36% in a bear market, but rises an average of 114% during a bull market. After every bear market there is a bull market. Another interesting fact is that bear markets last for an average of 289 days, whereas bull markets can last above 991 days.
Investors are afraid of recession. But history also shows that not every bear market caused a recession. It can also be an economic slowdown. Since 1929, there have been 26 bear markets in the world and only 15 recessions. Thus, history shows that the beer market is temporary. A bear market is short-lived as compared to a bull market. And after every beer market, there is a tremendous jump in the stock market.
What should be the investment strategy during bear market
The most important thing is to stay calm and don’t panic. Instead of investing anywhere, adopt the right strategy. Invest for long term and not for short term. Take decisions based on analysis and not feelings. And yes, definitely take the help of experts.
invest for long term
Warren Buffett says, “Be afraid when others are greedy, and be greedy when others are afraid.” Most investors invest in such stocks which may seem safe. But this short term mindset weakens their portfolio, and they miss out on big gains when the market bounces back. There are many big companies whose share prices fall due to fear in the market, irrespective of their long term performance. If you know how to choose companies that have the potential to rise, you can buy their shares at low prices. And later you can earn a lot of profit.
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Bring Diversification to Your Portfolio
Bear market or not, diversifying your portfolio and having a mix of stocks is always a great strategy. Not every company’s share prices fall by the same amount. If you have more profitable companies than loss companies then you will always be in profit. This is the reason why you should take the help of experts for diversification in your portfolio. There are companies whose share prices are very high but they are in debt and their performance is also not good. Remove such companies from your portfolio.
Invest in companies that have strong fundamentals. Also, have a healthy balance sheet and long-term performance. An index fund and ETF allows you to diversify your funds across multiple companies instead of investing in a single stock.
Pay attention to asset allocation
Keep a portfolio of different investment assets based on your goals, investment objective and risk appetite. The right strategy is to invest a portion of your portfolio back and forth depending on the market conditions.
You can invest in Systematic Investment Plan
Through SIP, you can invest a fixed amount regularly. You invest a fixed amount in a mutual fund scheme. Mutual funds are market instruments that invest funds in stocks, bonds, commodities, etc. Instead of investing lump sum, you can invest equally at different places. This further reduces the risk of market volatility.
(By Videsh K Totaare, MD & CEO, Archers Wealth Management Pvt Ltd)