Much like online shopping and shopping at malls, stocks too have an end of season sale. These happen when liquidity falls and there is not enough money to buy stocks. Such times present an excellent opportunity to make money in stocks. Specially for those who have resisted the urge to buy stocks when all around them were doing just that.
Typically, these investors have stored a lot of cash and can now benefit from discounted stock prices.
How much money should you have invested in stocks at this time?
Naturally, the answer to this question will be different for different investors based on their profile. It will depend upon their current portfolio size, future goals and most importantly – FUTURE STREAM OF REVENUE (i.e., salary or business income). For the sake of this article and keeping my own position in mind, Let us say you should have 22% of your portfolio invested in stocks at this time. The question then will be about which stocks to have your money invested in right now?
The answer to this should not be very different
Look for cash rich companies.
Compare valuations of past to current.
In a crash – Bad companies disappear – good companies fall
Yes 11.500 is still expensive the fact that it is at 14500 does not make it cheap
Let us try to consider valuations based on individual stocks. For this purpose, I have taken stock with the highest weightage in each sectoral index of NSE, as below:
Consider bell weathers of each sector.