We are all shaken, shaken by the ferocity of the fall in the stock markets. Never have we seen a correction of this magnitude in such a short period. A correction of more than 35% within 45 trading sessions is unheard and is sending shockwaves to investors. While the virus will get contained over time, investors are not sure when and the extent of damage it can cause to the economy.
Sensing an opportunity to make great returns are another set of investors who know that, ‘this too shall pass’. They are aware that the economy will be back and the stock markets will follow. The question they are asking, ‘When is it the right time to invest in stocks markets?’
Let us look at the below charts of the past bear phase in stock markets.
Looking at the above graphs, it becomes clear that it is very difficult to predict the market bottoms and know exactly when to invest during market corrections. What is easier, though, is to ensure that you invest during these volatile times.
If you have been fully invested, be clam and be sure that this situation will pass. If you have cash or funds allocated for this purpose, ensure that you spread your investments over the next couple of weeks. It is important to keep emotions at check and follow a disciplined approach to invest over the next couple of weeks.
A clear cut strategy for this purpose will help you tide over your emotions. For example, you could decide to stagger your investments in installments of 10% over the next ten weeks or you could go aggressive and invest 25% each in 4 equal installments. It is very important to consult your financial adviser before you pull the trigger to understand if this action aligns with your risk profile and financial goals.
The above chart tracks the Sensex from 1979 and makes it clear that although the markets have gone through turbulence with wars, financial scams, and economic slowdowns in the past, they have risen back and rewarded the ones who have stayed put and invested during these volatile times.
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