Hey guys I am back with the most important discussion regarding stock market crash recently happened due to coronavirus.
Introduction:
Last week the talk of the street was coronavirus It’s because market has taken it seriously, the growing impact of coronavirus in other part of country created an horrible situation. The market is getting tensed regarding production. Many companies have stopped production due to the non availability of raw materials.
Company like hero motocorp - the largest producer of two wheeler made an announcement regarding stoppage of production. The situation is same with other companies also. And the result is we saw heavy selling off in the market last Thursday and Friday and now on Monday.
This made me write this post to help those investors who have invested heavily and now are tensed whether they should square off their holding or buy more on dips.
What should an investor do?
First don’t be panic as the famous investor warren buffet once said “ It is a place where money get transferred from impatient to patient”
If you have invested in the market and worried about the free fall of your stock price, i must tell you that it is a global fall. All the global market is falling and the reason is coronavirus.
There is one rule in the market that we sell our stock only when our stock is not performing well while others are doing good. Only when our stock is getting problem in selling its product while the competitors are easily selling their products. That’s the situation when we need to worry about the stock and we should think about selling it.
But as we can see no such conditions are there in the market now so why thinking about panic selling?
Why loosing your hard earned money just because everybody is selling.
Before going with the crowd we should remind ourselves that 90% of people in the market loose their money. So who are you following? Those crowd that are loosing their money? No we should think twice before doing this.
Secondly, we should ignore expert advise in the current scenario. Their advise never work. There are some reason why they give advice in news channels and currently i am not going to deep down further about those reasons .
Now let’s talk about the reason of market fall.
The culprit is coronavirus. Well this type of incident happened in the past also. If not exactly coronavirus but somewhat similar fall. We have seen 2008 fall , market had recovered from that fall and made new high. That time also everyone was having panic selling and lost their money but those who did not sold or even dare to buy at that time has been able to earn handsome money.
If I talk about virus, we have seen swine flue, we have seen bird flue and all virus have disappeared suddenly. And i am sure same thing is going to happen with coronavirus.
Market forgets everything very quickly soon gone will be the days of fear from coronavirus and world economy will be back in track.
If i talk about dangerous fall of market in past, world has seen the fall of 1929 even market recovered from that. Fall of world war 2 but market recovered from that also.
What i want you to convince is that if you are long term investor you should not worry about fall instead invest more money into market strategically like 10% of your savings with every heavy fall.
One thing is 100% certain that market is going to recover from its low either sooner or later.
Warren buffet once said “ money combined with courage can give you handsome return”
Sometimes investors think that we should sell now and will buy after few days when price will be lower yes it’s called bottom fishing but the problem with this strategies is that you don’t have courage to buy later when price will fall because you never know how much is the bottom and you will never dare to re enter in the market and the time you re-enter you end up buying stocks at higher prices then before. That’s psychology we have to accept it.
Let’s talk about some other reasons of the failure of market.
Banking system in these days also failed to retain the confidence of investors. As we all saw yes bank incident in last week. The growing NPA’s of bank has been a great concern from few years . The lack of proper economic policy in this sector by government also hit hard to the market.
We may favour Narendra Modi’s BJP government in regard to national defence policies or foreign policies but we must accept the fact that the present government has failed in improving our economy rather I would say it worsened the economical situation.
But I would once again remind you we are investor and investor never gets affected from short term stories our target is 20 years and in 20 years market ought to perform better than any other source of earnings.
Some people hesitate to invest for so long but i want to ask them one question do you sell your newly bought house after one year or six month ? Do you sell your newly bought land in few months ? Do you sell your newly opened shop after 2 months? If no then why do you make so haste in stock market? Once an investor realised that they are not only buying stocks but businesses then they start ignoring these news.
How to buy stocks in this weak market?
Now if any reader is interested in buying stocks in the market they should be bit careful in stock picking. They should buy stocks which have strong fundamentals. Don’t pick the stocks on the basis of last year or last few quarters numbers. As warren buffet says always take last 5 to 10 years average because in this market every company is giving bad numbers from few quarters but their original value or intrinsic value remain same so always go for average of 5 to 10 years.
Second most important things, in this fallen market be cautious about debt-equity ratios. The larger is the debt the more problem company is going to face if profit is not enough to support increasing interest.
Third, don’t buy the company whose cash flow from operating activities is poor. In this falling market it is necessary to check this factor because how well company is performing depends upon the cash flows. Company can manipulate it’s profit but not it’s cash flow from operating activities.
Fourth is the business model, never have bet on the management of the company cause once a great investor peter lynch said “ always buy the company which can be run by fool management cause sooner or later it will be run by those”
So that’s all i had to suggest about stock picking techniques apart from that there are lot more points to think about before investing but above three factor are the most important factor to be considered.
In my blog I deliberately used the word “ investor “ because the whole suggestion is for investors not for trader. Investors have emergency fund with them they have very well financial literacy so they don’t require their invested fund every now and then. But investors sometimes get worried about their decision, they are driven by mass selling in the market. My blog tries to bring awareness to those investors to stay invested and not to repent later.
If you have any queries feel free to write me in below comment box!!
Introduction:
Last week the talk of the street was coronavirus It’s because market has taken it seriously, the growing impact of coronavirus in other part of country created an horrible situation. The market is getting tensed regarding production. Many companies have stopped production due to the non availability of raw materials.
Company like hero motocorp - the largest producer of two wheeler made an announcement regarding stoppage of production. The situation is same with other companies also. And the result is we saw heavy selling off in the market last Thursday and Friday and now on Monday.
This made me write this post to help those investors who have invested heavily and now are tensed whether they should square off their holding or buy more on dips.
What should an investor do?
First don’t be panic as the famous investor warren buffet once said “ It is a place where money get transferred from impatient to patient”
If you have invested in the market and worried about the free fall of your stock price, i must tell you that it is a global fall. All the global market is falling and the reason is coronavirus.
There is one rule in the market that we sell our stock only when our stock is not performing well while others are doing good. Only when our stock is getting problem in selling its product while the competitors are easily selling their products. That’s the situation when we need to worry about the stock and we should think about selling it.
But as we can see no such conditions are there in the market now so why thinking about panic selling?
Why loosing your hard earned money just because everybody is selling.
Before going with the crowd we should remind ourselves that 90% of people in the market loose their money. So who are you following? Those crowd that are loosing their money? No we should think twice before doing this.
Secondly, we should ignore expert advise in the current scenario. Their advise never work. There are some reason why they give advice in news channels and currently i am not going to deep down further about those reasons .
Now let’s talk about the reason of market fall.
The culprit is coronavirus. Well this type of incident happened in the past also. If not exactly coronavirus but somewhat similar fall. We have seen 2008 fall , market had recovered from that fall and made new high. That time also everyone was having panic selling and lost their money but those who did not sold or even dare to buy at that time has been able to earn handsome money.
If I talk about virus, we have seen swine flue, we have seen bird flue and all virus have disappeared suddenly. And i am sure same thing is going to happen with coronavirus.
Market forgets everything very quickly soon gone will be the days of fear from coronavirus and world economy will be back in track.
If i talk about dangerous fall of market in past, world has seen the fall of 1929 even market recovered from that. Fall of world war 2 but market recovered from that also.
What i want you to convince is that if you are long term investor you should not worry about fall instead invest more money into market strategically like 10% of your savings with every heavy fall.
One thing is 100% certain that market is going to recover from its low either sooner or later.
Warren buffet once said “ money combined with courage can give you handsome return”
Sometimes investors think that we should sell now and will buy after few days when price will be lower yes it’s called bottom fishing but the problem with this strategies is that you don’t have courage to buy later when price will fall because you never know how much is the bottom and you will never dare to re enter in the market and the time you re-enter you end up buying stocks at higher prices then before. That’s psychology we have to accept it.
Let’s talk about some other reasons of the failure of market.
Banking system in these days also failed to retain the confidence of investors. As we all saw yes bank incident in last week. The growing NPA’s of bank has been a great concern from few years . The lack of proper economic policy in this sector by government also hit hard to the market.
We may favour Narendra Modi’s BJP government in regard to national defence policies or foreign policies but we must accept the fact that the present government has failed in improving our economy rather I would say it worsened the economical situation.
But I would once again remind you we are investor and investor never gets affected from short term stories our target is 20 years and in 20 years market ought to perform better than any other source of earnings.
Some people hesitate to invest for so long but i want to ask them one question do you sell your newly bought house after one year or six month ? Do you sell your newly bought land in few months ? Do you sell your newly opened shop after 2 months? If no then why do you make so haste in stock market? Once an investor realised that they are not only buying stocks but businesses then they start ignoring these news.
How to buy stocks in this weak market?
Now if any reader is interested in buying stocks in the market they should be bit careful in stock picking. They should buy stocks which have strong fundamentals. Don’t pick the stocks on the basis of last year or last few quarters numbers. As warren buffet says always take last 5 to 10 years average because in this market every company is giving bad numbers from few quarters but their original value or intrinsic value remain same so always go for average of 5 to 10 years.
Second most important things, in this fallen market be cautious about debt-equity ratios. The larger is the debt the more problem company is going to face if profit is not enough to support increasing interest.
Third, don’t buy the company whose cash flow from operating activities is poor. In this falling market it is necessary to check this factor because how well company is performing depends upon the cash flows. Company can manipulate it’s profit but not it’s cash flow from operating activities.
Fourth is the business model, never have bet on the management of the company cause once a great investor peter lynch said “ always buy the company which can be run by fool management cause sooner or later it will be run by those”
So that’s all i had to suggest about stock picking techniques apart from that there are lot more points to think about before investing but above three factor are the most important factor to be considered.
In my blog I deliberately used the word “ investor “ because the whole suggestion is for investors not for trader. Investors have emergency fund with them they have very well financial literacy so they don’t require their invested fund every now and then. But investors sometimes get worried about their decision, they are driven by mass selling in the market. My blog tries to bring awareness to those investors to stay invested and not to repent later.
If you have any queries feel free to write me in below comment box!!
