COVID19 or Coronavirus reminds us of the uncertainties of life. But thankfully, there are uncertainties in the world of investing. End of 2019 gave good rally in Market and share Market hit new rally and it was expected that 2020 will be good opportunity to make good money in LargeCap & MidCap so major Investment started shifting to LargeCap and MidCap and currently all caps are in Blood Bath it seems the market is now in Bear Trap.
One certainty is that big rallies in markets are most often met with high levels of decrease, though the timing is never clear. Everyone knows this, yet every time a downturn comes a large number of investors stare into the falling market like rabbits trapped by the headlights of a car and wonder why they did not move. And this certainty has become obvious with the rise of the fear of COVID19 - most traders and investors are in the debris of falling investments and surrounded by worries of a further decline and the way circuit break happened on 13th March 2019 pour oil in the fire. With markets, each subsequent panic sought situation has only spread faster and become more furious than the previous one.
Understand Market -
Understanding bias and psychology of markets becomes more important at times of panic in the markets when irrationality takes firm command and investors need to step back from the market and analyze what is happening and what will it result. So how does one navigate through this?
Long Term Investor -
Whenever markets fall vertically and sharply, rarely do recoveries happen in a ninety-degree fashion to the upside? Most traders have a tendency to be overly optimistic and hold views that it would come back up strongly. Here’s where your optimism can mislead you and you’re likely to cut yourself catching a falling knife. If you’re doubtful or stressed out, its best to stay out of the markets for a while. Sometimes sitting tight is the right thing to do.
- Don’t jump to conclusions that the next short-covering bounce will bring a rapid recovery as of 13th March 2020. The market recovered however it may be short covering and fresh long buildup / short buildup needs to be analyzed first.
- Do not trade with the fear of missing out. Short covering bounces can be sharp and volatile; hence, use very strict risk management methods (stop losses) and a good risk-reward ratio in making positions.
- If your positions increase in value by a large amount, take profits in a systematic manner and protect your gains should there be a sudden turn around also trail your stop losses.
What would be more important for the market now is to consolidate well on the downside first? There needs to be a meaningful base (time correction) on the downside, and only then if it chooses the direction to the upside.
Better foundations = Strong buildings
Technically market has breached major important levels. Hence, all major supports have become resistances and on bounces, it would only generate more selling pressure so it is better to start investing small capital gradually.
How to Invest-
If stock markets were entirely rational places, they would hardly offer any exciting opportunities to investors. For investors, this is a lifetime opportunity to get into the market. Look for quality large-cap companies, stocks with a history of creating wealth in the past and industry leaders with strong management. Remember if Time goes down, it will definitely go up, you have to make sure that the clock is running.
Fresh Investments:
- Use simple SIP strategies, like a fixed rupee amount invested daily / weekly / monthly.
- Don’t worry about the size of your investment. Focus on consistency and quality investments.
- Be patient and don’t expect quick returns so keep investing.
Past Investors
- For those invested prior to the fall, if you are holding good quality stocks in your portfolio and have seen a sharp cut in prices, and are sitting on losses, be patient, they will recover in time.
- If you’re unsure about the quality of the company, sell them on bounces and re-invest in better firms.
Events of this magnitude will delay returns, but patience pays off. There will be sunshine after the rain. Markets and life will be back on track with time as instead of timing the market we should give time to the market.
Below are some stocks which I have in my core portfolio and if it suits you then you can invest in them but make sure you Invest in same percentage ratio as below portfolio is designed to adjust risk such that if you keep SIP on below fund for 5 years then even if the market falls you will have a decent overall profitable return.
Companies
PERCENTAGE OF INVESTMENT
ENTRY PRICE
HDFC Bank Ltd (NS:HDBK)
8%
1000-1050
Bharti Infratel Ltd (NS:BHRI)
10%
220-230
Sun Pharmaceutical Industries Ltd. (NS:SUN)
8%
380-390
Mahindra & Mahindra Ltd. (NS:MAHM)
8%
420-430
Exide Industries Ltd. (NS:EXID)
7%
140-150
Deepak (NS:DPFE) Nitrite Ltd (NS:DPNT)
8%
455-460
Reliance Industries Ltd (NS:RELI)
10%
1100-1150
ITC (NS:ITC)
10%
160-165
SBI (NS:SBI) ETF Nifty Next 50 (NS:SBIN)
7%
240-250
Kalpataru Power Transmission Ltd. (NS:KAPT)
7%
280-290
Tata Consultancy Services Ltd. (NS:TCS)
10%
1800-1820
ICICI Lombard General Insurance Company Ltd (NS:ICIL)
7%
1120-1130
Total
100%
Always remember the eighth wonder of the world is Compounding and greatest wealth is right Info.
Note: This article is for general information only. Kindly consult with your investment advisor before investing. We highly recommend to always trade using a stop loss.