Whether you are a short-term investor, trader, or long-term investor, one question that must have crossed your mind, especially during the initial days is what is the right time to invest In Stock Market, right? This is a thing that every investor stumbles upon at least once in their investing journey, actually a lot of time as timing the market is quite difficult. Experts and top investors say it is not about timing the market but the time you put in the market, which is quite true.
With the global markets having a blood bath due to geopolitical issues and other global cues, Indian Rupee is at an all-time low, do you think this is the right time to invest in the Stock Market? Let’s find out.
If you are a long-term investor, then even if the market hits the rock bottom, you should have to worry much. The reason being the more time you stay invested in the market, your portfolio returns will be less affected by the volatility. If the market is crashing today, you know it will again skyrocket in the near future.
Instead of panicking when the markets are crashing and hitting an all-time low, as a long-term investor what you can do are mentioned below –
1 - When the markets are at their lowest, it offers many gems in the market : Companies that have huge potential to outperform in the next five to ten years at cheap prices. This is the best time to buy some of them.
Tip: Analize your portfolio, risk profile, and return expectation, and find out which of such stocks can benefit you in the long run. Moreover, many highly demanded stocks also fall during the sluggish market run, which is not quite affordable to buy in a bull market. You can buy them when the prices are low.
2 - Do not stop your Stock Market Investment via SIPs : Often retail investors who invest via SIP stop their SIP and quit the market when the market hits the lowest, but you need to understand that SIPs don’t get affected by all-time-low in the market. Rather, during this phase, you can buy more units of the fund as the prices of the stocks are low. Then comes the long-term factor as well, usually, people invest in mutual funds via SIPs for a minimum of 3-5 years.
Tip: Markets are unpredictable and volatile and that is why systematic purchase works best in the long run. Systematic stock market investment helps in rupee cost averaging which should continue, especially when the market is low. If you are not 100% confident of stock picking during volatile markers, look at mutual fund investing to increase your equity through a trustworthy mutual fund distributor.
3 - Review your current Asset Allocation and rebalance if needed: Ideally, you need to rebalance your portfolio annually ; but in times when the stock market is at an all-time low, there is all the more reason to balance your investments according to your ideal asset allocation. If you have not balanced your portfolio for a long time and have a lopsided asset allocation, it could affect you in the long run, especially during a market slowdown.
Tip: Rebalancing your portfolio is necessary from time to time according to your risk appetite and ideal asset allocation.
4 - Consider macro-economic factors : The next thing is evaluating the macro factors such as growth in FDI, sectors which are booming, collection of taxes, and others. These will suggest whether the sharp decline in the market is momentary or the market is going to enter a bear phase.
Tip: For instance, even though the global markets are sluggish, so is the Indian stock market at this given point in time, but FDIs rising, and so is the collection of GST in the economy. This indicates the slow-down in the market will probably going to be short-lived.
For short-term investors, an all-time low in the market can be dangerous. It can wipe away all the profits they have earned. However, buying shares during this phase can help them gain potential profits in the near future but for that, picking the right stock is crucial.
To conclude, long-term investors should reassess their portfolio, look for potential stocks in the market which are selling cheap and invest in them during a market slowdown and stay invested if the macroeconomic factors are favourable. While for short-term investors, it can be an opportunity as well to buy stocks at cheap prices and sell them when the prices start rising. However, both types of traders must evaluate macroeconomic factors to understand whether it is just a slowdown or a bear entering the market.
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