Managing investments in a Depressed Market

Equity is a risky option in the short term. However, it can beat all investments in the long term, say experts.

The stock market has suddenly become a lonely lace for many. Until recently, they were part of a big group, cheering the onward march of market indices and predicting one milestone after the other every financial quarter. Suddenly they find themselves alone, submerged by bad news. The cheerleaders have all vanished. Their places have been occupied by dooms day predictors. They are now chanting sensex at 12,000 mantra. Their thesis is based on the latest inflation data, which showed that inflation has breached 7% mark for the first time in three years. They are certain that the government would be forced to sacrifice growth for price stability something that the finance minister has hinted recently. So, another round of policy rates hike by the Reserve Bank of India is round the corner anytime now. That means interest rates would go up once again, denting corporate bottom lines and profit.

If you are lucky enough to catch hold of a seasoned investor in the market somebody who has seen many ups and downs, the answer won’t depress you that much. Yes all these bad news are lurking in the market. Also, there are global economic woes and a possible recession in the US market which could spoil the party. But individual investors should remember that when you have had such dream run in the market for the last four years, it is inevitable that the market may get into correction phase. They should remember it is their chance to enhance their personal wealth.

You don’t change your investment plans according to the market mood. Fortunately, most clients have started understanding about it. Once you have invested in the stock market for retirement which is 15 good years away why do one worry about the money just because market is going though a bad phase for a few months or a year? .. Here is what they should do. First, stick to your plan. Whether you are putting some money on a regular basis on stocks or you are following a proper plan, try to stick to it during good and bad times in the market. The only rule is that you don’t need the money at least of the next five years. If you don’t have time on your side, always stay clear of stocks Equity is an extremely risky investment option in the short term. However, it can beat all other investments in the long term. It is not an assertion, but many studies have proved that is the best bet when it comes to meeting long term goals like retirement. So, get ahead with that systematic investment plan. Don’t even think about abandoning it.

Second thing to remember is that it is foolish to run away from the market during a bear phase. For example, all of us know about the bull phase in the last four years or so. But do you remember there was bear phase preceding it? Well, those who have stayed invested or invested during that period got the maximum returns when the bulls returned to the market. So, it is always important to remember that a depressed market is a haven or bargain hunters. Remember, bulls were justifying valuations when the market was at 19,000. Now, with the sensex merely above 15,000 the same stocks are available at extremely attractive valuations.

Finally, always have an eye on fundamentals. For example, nobody is talking about a run away inflation or a sharp dip in economic growth. Everybody is discussing only about short term set backs So be in the market to see a better tomorrow.