Know About the Ideal Climate For Investing in Stocks
When an investor is fueled by greed, failure and economic ruin usually usually wait at the finish line. Investment needs to be done as per the rules of investment as applicable to the market, sometimes taking advantage of the ideal climate in the exchange. But the climate in the market is mostly volatile. You have to find out what situation and strategy is ideal for you. An intelligent investor need not get panicky at the behavior of the masses as for buying and selling. One has to carefully understand the implications of the prevailing climate and take decisions on economic considerations, not on the basis of emotions.
Take the present economic scenario. Is this the ideal climate for investing? Nine out of ten persons dealing in shares will not advise you for investment adventures. On the contrary panic selling of the shares is happening through the world. A huge amount of volatility is seen in the market. Majority of the investors believe that the bull party is over. But take counseling from the long-term investors. Most of them will make use of this market correction as an opportunity to buy and accumulate blue chip shares. Even in the present crisis related to investments, is there a major change in the fundamental state of the economy? According to researchers and analysts, absolutely not!
A prudent investor will not entertain a grim view of the present scenario. As per the forecasts of the economists, the economy is all set to grow. India would continue to be the second fastest growing economy in the world after China. No doubt, there is some weakness in the US economy at present. But that is not the end of the story. The rate cut in the US will result in more funds flowing in the US markets.
The prudent and the bold will think that this is the ideal climate for further investments. Medium term and long term decisions will hold good, but not short term and day trading . Rallies and corrections are nothing new to the market. Proper homework and constant advice from your broker are the additional tools that will help you take advantage of the current conditions.
But in the present conditions no one will be able to predict the bottom-line of the markets. Buy shares in small bundles at the same time keep in mind the transaction costs, while working on their size. Risk appetite is not bad in investing, sometimes it is good, but do not go beyond your capacity. Divide the portfolio between short term (in very small percentage of the portfolio) medium and along-term investments. Take extra care about the short-term investments. They may provide very handsome returns but the selection and the trading time is important.
If you employ some strategies, (they are the usual strategies in vogue in the share market), this condition is worth enjoying from the point of view of future profits.
No doubt the market is volatile, but the bold and smart investors do not panic. "They buy when everyone else is selling and sell when everyone else is buying."
The share market is running through the rough patch but smooth royal road is ahead, if past behavior of the market is any indication. So stick to the basics and invest. Do it with proper objectives, stop-loss targets and profit booking. An investor needs to have sufficient liquidity in hand after investing in shares. These conditions are certainly not suitable to borrow and invest. You need to summon courage to go against the crowd. While the market is in deep trouble, this is the ideal time to invest. But do not commit your cash into the market in one go; do it gradually and systematically and constantly review the position. Do not overreact.
Stock market does not change the climate of its own; the onus for changes lies with the buyers and sellers! This is the hard truth!