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Markets are Down - Is It Good to Invest? Research Team | Posted On Friday, March 20,2020, 05:47 PM

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Markets are Down - Is It Good to Invest?



Markets are Down - Is It Good to Invest?

If you want to make money in stocks follow the simple principle. Buy Low. Sell High. Well, it’s difficult to time the markets. This is why you must invest in mutual funds through SIPs. With mutual funds there’s no need to time the markets. Stick for the long term, spend time in the markets and become rich through SIPs.

What are SIPs? This is a method of investing in mutual funds. You invest small sums regularly say once each week, fortnight or month in the mutual fund scheme of choice. SIPs have the twin benefits of compounding returns and rupee cost averaging. Compounding returns are return on return and rupee cost averaging helps lower mutual fund unit costs when markets are down.

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See Also: How Do I Invest in Share Market?

Markets are Down - Is It Good to Invest?

The Coronavirus has spread across the globe. Over 200 citizens have died in the US. Italy has recorded over 3,400 deaths. The global death toll is over 10,000. The coronavirus has shut down countries and cities across the World. Back home Maximum city Mumbai is in lock-down along with Pune and Nagpur.

The World economy and the Indian economy are in tatters. Travel, tourism and the hospitality industry are seeing multi-year lows as trains are canceled and planes are grounded. India’s GDP is severally hit and could take several quarters to recover.

BSE Sensex and Nifty have crashed taking most stocks with them. Top quality stocks are available at really cheap prices. The top question on everyone’s mind. Is this the right time to invest?

Right time to invest in stock markets?

In stock markets it’s always a good idea to buy quality stocks when markets are down. If you get good stocks at low prices; definitely buy them. Make sure to hold the stocks for the long term and you could see good profits. Many of the stocks are as cheap as they were in 2014. Buy only if you are prepared to hold on for the long term.

All stocks are cheap. What to do?

Most stocks are cheap and it’s tempting to buy almost everything out there. You must be selective in stock picking. Always look at value investing. Pick up only those stocks which match your investment style.

Identify attractive sectors       

The fundamentals of a company must be strong for future growth. Look at quality stocks in IT, FMCG, Private Banks, Autos and Oil and Gas to make a profit.

Get the timing right

Invest in the markets now, only if you have high risk appetite. You must be ready to bear medium and short term losses. Smart investors take the benefit of sharp market falls.

Great as it seems, don’t rush the stock purchase. Buy in a staggered manner instead of pumping money at one go. Accumulate quality stocks in a staggered manner. If you invest in parts there’s flexibility to absorb correction and average costs. When the market recovers you are bound to make some profits.

What Causes Shares to Rise and Fall?

Share prices change because of shifts in supply and demand. Supply and demand affect stock appeal and ultimately the share prices. The strength of the economy, company earnings just drive demand and supply. So, even if you think the stock is undervalued, the market decides the true worth.

If there are a lot of buyers for a share, the share prices go up. This happens if there’s limited supply for this share. If supply and demand is equal, share price moves in a narrow range. Sellers push shares back into the market increasing supply. They sell when they feel the share is losing too much value. If demand doesn’t match the supply, the share prices go down.

See Also: Share Market Investment Steps for Beginners

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