Recession-Proof Investment strategy in stock market | Get higher returns than FDs

Market is down; everywhere is panic of pandemic COVID-19. Investors are withdrawing their funds from the market. Is this the right time to invest? Yes, it is. Warren Buffett said, “Be fearful when others are greedy and greedy when others are fearful”. This is the time when you can get good stocks at a very attractive price. Today I am telling you what you should do and should not do while investing in the stock market. I am also going to share my strategy for the bear market (when the market is falling). How could I manage my portfolio returns more than 15% in this crisis?

In India, retail investor volume in the stock market is very low compare to developed economies. Below are the reasons:

1. Conservative nature – Indians have a conservative approach toward the stock market. We don't even try this market. We have more faith in traditional instruments like FD, RD, and Insurance policies.

2. Risk involved in the Stock Market - Share market is risky but full of opportunity. We look only at one side of the coin. Share market is risky when you invest carelessly, without knowledge or with the wrong approach.

3. The stock market is gambling – We look at this market with negativity. We compare it to gamble. It is a gamble when we use the wrong strategy of earning overnight, but when we show the right approach and use our fund by keeping mind long term horizon then it is called investment like any other business.

4. Preference to physical assets – Indians still have a love for gold, silver & lands etc. Many people in India consider investing in Real estate, gold, etc easier compared to paper assets.

5. Lack of awareness – Due to lack of awareness, people have no proper idea about the stock market. How it works? How to open Demat? What is the difference between Demat and Trading Account? How to pick good stocks etc. They consider it a bit of a mess. However, nowadays it has become easier and you can get all services like Demat account opening, stock-picking advice etc just by sitting on your couch.

Things to remember while investing in Stocks in Bear market

1.  Invest in only Debt-free and fundamentally strong stocks: In bear market always invest in Debt-free or less debt stocks. No need to invest unnecessarily full of debt stocks while you may get fundamentally strong stocks at a very attractive price. In this kind of economic slowdown, only strong players survive.

2. Buying in steps: where there is a bear market, there is uncertainty, and nobody can predict the exact base of the market fall. You just invest in stocks when you feel your stock price is attractive now and this is the time to invest. But invest only 1/3rd of the fund. So that if the share price goes up, your returns will go up, and if the share price goes down at least 10% fall, buy more quantity. If again a 10% fall, buy more stocks. By this technique, you will add more stocks in your portfolio at a cheap price.

3.   Do not sell in a panic: If you pick the stock at a fair price and it is fundamentally strong, do not sell out it in a panic due to falling price because today or tomorrow it will give you high returns without any doubt.

4.  Set stop-loss (GTT option for zerodha’s user): GTT option allows you to set the stoploss for stocks. When your stocks have gained huge profit and you think you should book profit if share price fall then you can set stoploss, so when your stocks fall it automatically sells out and you can repurchase it when you think the stock is available in attractive price again. However, it is your personal choice to use GTT because in the long run stocks will definitely go up if it is fundamentally strong.

5.   Do not get attached with a particular stock: Do not buy any share if it is not available in attractive price. There are so many stocks in this market. Our motive is to earn profit not to earn profit by a particular share.

6.   Buy always in a Bear market rally: In this uncertainty, the best time to buy stocks when the market is bleeding and everyone is selling. This is the time when you get a fundamentally strong share at a very attractive price.

7.   Never ever buy in Bull market rally (when the market is going up): In this kind of uncertainty bull market rally is an illusion. Big players like Mutual Fund Houses or FIIs create this illusion to trap the retail investors. Real bull will never come until things become normal or permanent solutions come out.

8. Diversification: Try to invest in different shares and sectors but do not invest more than 10% of your total investment in a particular share. By this technique, you can diversify your risk.

(Click here to use Finology investment advisory services for getting handsome returns from Stock Markets & Mutual Funds)

(Click here to open online Demat & Trading Account with Zerodha)

 

I hope this article will be helpful. If you have any doubt or queries feel free to write us.

  

   Disclaimer: The views and investment tips expressed in this article are my own. I advise users to consult with certified experts before taking any investment decisions.