Stock Markets falling-Where to invest now?

Stock Markets falling-Where to invest nowStock Markets falling-Where to invest now?

Stock markets are falling. SENSEX is at 17,900 levels. 2300 points down in last 4 weeks. Your mutual funds are showing negative returns. You must be up-set with your investments. Gold prices are going up. If you think to book losses and come out of stocks or mutual funds, then you are one among the thousands of investors who lose their money every day with this strategy. Where to invest now in falling stock markets?

Can we invest in stocks now?

Yes of course. I am not saying that your money would get double or triple in next few weeks or few months after market recovers. Look for SENSEX or NIFTY stocks. Which stocks are falling heavily? Is it temporary phenomenon or fundamentally something is wrong with the company? If this is temporary situation, why not you buy such stocks? Good stocks are purchased not when someone is buying, but when someone is selling. Buy stocks when stock markets are falling and not when markets are reaching its peak level. Buying index stocks during correction is the good strategy to make handsome returns in long run.

Also read: 10 investment mistakes you should avoid

Now don’t ask me a question what is the bottom level of SENSEX so that you can buy stocks. No one would be able to predict this.  If your broker is telling you the bottom level of SENSEX now, he is fooling you.

Now the question is how to select winning stocks. I agree that it is not that easy.

Choosing SENSEX stocks could be one strategy. E.g. TCS has shown a high peak of Rs 1,900, now currently it is trading at Rs 1,700. Means 10% down from its peak level. But at what level one need to buy. You may adopt different strategies like accumulating at various price levels from now and each and every dip should be looked as buying opportunity.

Choosing mid-cap stocks could be another strategy. The risk is they may be winners or losers in long run. You should exercise this strategy with caution.

Can we invest in mutual funds now?

Your mutual fund portfolio would have shown a dip of 5% to 10% in your investment amount during this stock markets fall. You might be thinking of exiting now and investing in bank FD or post office schemes hoping you would get at least 8% to 9% returns. This is the general tendency among the investors who would invest in mutual funds to make money, but finally they would lose and exit mutual funds and blame that they are not good for investments. Let us consider two scenarios under falling stock markets.

Scenario-1: You have invested in X mutual fund scheme. This mutual fund has invested in 3 large cap stocks. 3 Stocks are falling. Your mutual fund scheme would have exited from Stock no.1 and retained stock no.2 and 3. Blood bath completed, now markets are reviving. You keep pumping fresh investment. Stock no.1 has gained faster. But your mutual fund scheme has not gained much as it has already exited from stock no.1. So your mutual fund returns are growing at slower pace when markets are rising.

Scenario-2: You have invested in X mutual fund scheme. This mutual fund has invested in 3 large cap stocks. 3 Stocks are falling. Your mutual fund scheme has NOT exited from any stocks and retained all stocks. Your mutual fund investment value reduced by 20%. You keep pumping fresh investment. Blood bath completed, now markets are reviving. Stock no.1 has gained faster. So your mutual fund returns are growing at faster pace.

If you observe any of the above two scenarios can happen to your mutual fund investment. What do you see as end result? Returns growing at a slower pace or at faster pace. Means there are more chances that you would get returns, it is the question whether they are good returns or moderate returns. If you choose out performing large cap mutual funds or diversified funds, you would definitely win.

Can we invest in gold now?

When I have written an article about investing in gold during Mar-13, the gold prices were at Rs 2.8K / 1 gram. My recommending was to keep investing through SIP / SEP regularly. It has fallen to Rs 2.5K / 1 gram within 2 months. Several investors posted saying what to do. My recommendation was to continue investing for each and every dip. Now gold prices climbed to Rs 3.2K / 1 gram. Should you invest now? My answer would not change even now. Every time there is fall in stock market, gold prices would go up and vice versa. I am observing this for several years. Keep investing every month through Gold ETF’s to avoid any market volatility. Your objective is not to make money in short term. If yes, stay away from this.

Also read: Target Investment Plan (TIP) by ICICI

Bank fixed deposits / RD’s

Investors think to pull money from stock markets and put them in Bank FD. Even I have done similar things in the past. This is the time where you need to break your FD/RD and slowly start pumping your money into stocks and mutual funds. You should consider the risks involved in this before doing it.

Conclusion: I am not saying put all your money in stocks now. What I am saying is to utilize this opportunity and invest in winning stocks. You should start accumulating such stocks to keep them for long term. 

Readers, what are your experiences in falling markets? Have you invested in such market scenarios. What worked well and what not?

If you enjoyed this article, share it with your friends and colleagues through Facebook and twitter.

Suresh

Stock Markets falling-Where to invest now

Suresh KP
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26 comments

  • Sanjay Sharma

    Dear Readers,

                           There is a Investment model in Stock Market which will consistently give you handsome returns irrespective of where the market is going, 2300 points up or 2300 points down.

    I will soon share an article on this at this page.Watch out for my article. Sanjay Sharma (I have published below article earlier) https://myinvestmentideas.com/2013/08/is-investing-in-home-equivalent-to-buying-an-asset-or-liability/

  • Piyush

    I invested in 2008/09 crash with play money in US markets….. I had healthy returns on my money for couple of years and kept investing since then….. I recommend to invest in India stock market ONLY if you believe in Indian economy…. I believe India will be better in 2 years, post-election, no matter which government take over…. look for companies that you are familiar with, and you understand their business….

  • Renganathan

    Dear Suresh,

    Right article at right time. If you are suggesting some winning stocks, it would be very helpful for the new investors like. Looking forward to your analysis and suggestions in stock.

    Thanks,

    Renganathan

  • Arun

    Dear suesh,

    I am investing through some investment company in SIP.My current portfolio to invest 5K each month going to invest in 3K IDFC Primier Equity fund-A & 2K ICICI Pro Focused Bluechip Fund.

    But my investment advisor suggested me not to invest in equity,want to see some benfits go for investment in Balanced Fund for 12 to 15 % returns in 3 to 5 years & then extend to 10 Years if seeks good returns in 5 year time horizon.

    • Arun, Balanced funds are meant for those who want to take less risk. You cannot expect 12% to 15% returns in balanced funds that too in short term. HDFC Prudence has provide good returns of 15%+ in last 10 years, but not all provide such returns. If you are risk taker, invest in equity funds to gain more. You can invest in diversfied funds or large cap funds to gain more.

      • Arun

        Suresh, Is it good to make all portfolio in equity for an amount of 10K & time horizon of 5 years ,if its working fine then continues.Tell me 4K UTI Equity Fund(G)/Franklin India Opp(G),4K in UTI MNC Fund(G),2K in Tata Balanced Fund(G).

  • shaheen

    INVEST IN E-GOLD OR STAY INVESTED IN THE STOCK MARKET AS THE TIME IS RIGHT WHEN THE MARKET IS LOW.

    • Shaheen, Investing in e-gold is riskly at current situation as NSEL is in mess. We cannot expect the “low” of market, hence investing regularly or investing in dips would help to get better returns.

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