Most of the investors are suffering now with losses and desperately want to know when the market will rise again.
From my pointless experience of timing the markets, I would say it’s very difficult to exit just before the fall of markets and to entry just before the markets start rising.
“Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.” – Paul samuelson
Stock market is not about excitement but rather Patience game.
Let’s look into some interesting charts.
Chart:1 ( Jan – 2008 )
We can see that in January, the market witnessed one by one seller circuit. Then after it goes into consolidation and rises till the 5400 levels in around may-june. Investors were starting to assume that the bottom had been made and many retail investors jumped into the markets and started buying. Now let’s look into second charts.
Chart:2 ( Oct – 2008 )
So investors started buying but what happened around october that market made a new low. Many investors were totally clueless and fund managers too.
What had led to this to investors ? Why did they stuck at the higher levels and booked heavy losses ?
Mainly two reason:
- FOMO (Fear of Missing out)
- Timing the Markets.
The four most dangerous words in investing are: “This time it’s different”.”
Sir john Templeton
Let’s come to the current scenario.
Markets corrected significantly in March due to the Coronavirus pandemic. Made bottom of 7500 and currently trading at 9300 (Up 23% from lows).
Since one month all businesses are closed. People hardly bought anything during lockdown and no major stimulus package has been announced.
Some Important notes :
- Major world’s stock markets are up almost 20% from recent lows and showing significant optimism which might not take place.
- Crude oil prices have fallen into negative which is the biggest positive as of now for emerging markets like India.
- Many businesses will shut down permanently after the corona.
- Many businesses were found hard to sustain due to GST and Demonetization can face a significant effect due to corona.
- In any economy MSMEs play a significant role which will face adverse effects on their businesses.
- Pharma and the consumer sector will be the first to overcome the corona crisis. Recent prices of Pharma and some consumer stocks are in over optimism phase and higher chances of correction.
- As per current data, India has lost 25% jobs already. Which is significant and dangerous for the economy.
These are some points which indicate a different scenario than the current.
What Investors Should Do ?
If we look at the history we can see that investors lose significant money in the short term in this type of situation. Retail Investors are always trying to time the markets and end up losing money.
In the current situation many blue chip companies are at throw away valuations.
These steps might help an investor.
- If you can research the companies then find good companies and start buying in a staggered manner otherwise hire an advisor.
- If you are doing the SIP, continue it and buy more units during the falls.
- Save more in this situation and buy more stocks and SIP units.
- If you are new and have not started yet, start as soon as possible. It’s a once. in a decades opportunity.
- Never borrow tips, remember it’s your hard earned money.
- It’s more important that your outlook of an investment should be more than 10 years.
As we discussed , you might get an idea that no one can timing the markets and can tell you when the market will rise. If so then remember that he or she is lying.
“If I’d only followed CNBC’s advice, I’d have a million dollars today. Provided I’d started with a hundred million dollars.”
This type of opportunity is created once in a decade. Take a benefit of this opportunity as much you can and start your journey towards financial independence.
————————————-Best Of Luck—————————————-