Things continue to go from bad to worse in terms of the coronavirus epidemic. Yet the stock markets have recovered up to 20% of their losses over the past 2 week.
As an investor how should you go about your financial planning?
The answer to this is not very different from how you should have done financial planning when valuations fell below 19 for the first time (this was on or about 9000 level on the Nifty). In a bigger part, the answer depends upon looking at the future, not of stock markets but of your own inflow of money. You can commit all your money to stock markets at this time so long as you don’t need that for the next 3 years. Please make a list of your future money flow.
Nobody will be able to catch the bottom!
. . . . and those who are able to catch market bottom, will still not be able to catch the bottom of the stock that they end up buying. I hear that there could be another dip (the so-called double dip!) and I am pretty confident that there will be. In undervalued markets what is more important however is to have a list of stocks that you would like to buy and buy them 1 by 1 instead of looking at the overall market level. There will be stocks which are cheaper today than they will be after another 10% correction. A case in point is pharma stocks, which have already rallied a lot in the current ‘fall and rise’ i.e. in the current dip from 12,000 to wherever and back to 9,000.
Bottomline: When markets are undervalued, you should be looking to buy stocks with the same zeal and passion with which advisors recommend that you buy when markets are super expensive, as they were for most of last year! Collect stocks like how you collected coins or stamps (that was before internet and technology ruined the game, I still have a cupboard full).
Think about it – in super expensive markets, you thought some stocks will totally outperform the broader markets. Why then are you waiting for another hades before you buy those stocks? It beats me! Beats me completely! Stop thinking like retail. Think like the institution which is buying. How do you think markets rallied so much this week? Is it a trap created by some big hands – absolutely not. Buy with full confidence that markets will fall below 8000 again. Just buy right.
What is Right?
Keep in mind that the repercussions of this lockdown will be felt for years to come. At some point however the tide will turn. You will miss it while you are waiting to catch the bottom. It also begs the question:
If everyone is waiting for that correction again, then who will sell for that correction to happen? Certainly, aliens are in no rush to sell their holdings.
The only thing you can do is to buy the right stocks. Hope to make a lot of money over the next 3+ years. How much is a lot is again about what you buy. What you buy is more important in these markets than when you buy it. So what is right . . . . .
. . . Banks are right, NBFCs are right, Pharma & Autos are right. IT, FMCG and Consumer foods have always been right. Basically, everything is right if your frame of mind is right.
I may not be a bad guy to get in touch with for a good portfolio construction. Talk to me by writing in at firstname.lastname@example.org . I am confident that I can make you a lot of money going forward. Stay indoors and happy investing!