HOW TO FIND OPPORTUNITIES IN BEAR MARKET
The share market is filled with both the cycles – the bull and the bear. It not yet proved these cyclic markets will be coordinating with the economic conditions.
There is an opportunity in both the market and at the same time destruction too. You have to always keep in mind, that markets are slaves of earnings.
Of course, bear market losses will be like hurting our heart with a hot fired knife. Intelligent people use the same bear market as an opportunity to build their wealth.
Here I am going to share you, how to overcome the bear market and take the most advantage from it.
WHAT HAPPENS IN A BEAR MARKET?
· The bear market can happen with a new, market crash, government decision, corporate management changes, etc.
· When a bear market starts, it pulls the market index to 10-20% sharp, sometimes even higher.
· No one can predict the exact bottom. If you wait for the bottom, the price will rise again. You will be missing the advantage.
· If you buy while the market starts to fall. Your stocks will decline further and it also makes a panic in your mind.
· During a fall in market, both quality, and over-valued stocks fall together.
· That’s the perfect time to buy your stocks. Be ready with the intrinsic value of your companies.
· The bear market will be having both V- Shape and U-Shape recovery.
CHOOSE YOUR STOCK AND BE PATIENT:
· As an investor, you should have picked a stock which you would like to invest in.
· You have to wait for the correct time in the market to get the opportunity to buy.
· Both bear and bull the market gives us the opportunity, but the bear market provides huge opportunities.
· People around the world will wait for the market crash, as many billionaires are made out of the market crash and recession.
· The only secret behind them is, they have picked their company to invest and have wait to invest in those stocks at a very attractive or lower price.
· Always go for debt free stocks, which will survive in a market crash.
THE PERFECT BUY OF BEAR MARKET:
· Most intelligent investors, try to invest during the bear market. It gives them the perfect buy for their stocks.
· Even myself, bought my favorite stocks in the March market crash and after which I am just watching the market.
· The perfect buy is termed as the price at which you buy your stocks in a falling market. Even the stock’s decline further you don’t get panic. You know well on your company that will bounce back.
· The following strategy can be used for a perfect buy.
· When the market starts to crash and all the stock’s price declines. Prepare an intrinsic value for your watch list stocks. The intrinsic value has both upper arm and bottom arm.
· When your stock price reaches the upper arm invest only your 5-10% of the corpus.
· When it even declines, purchase another 10-15%, then another 15%.
· If the price of stocks reaches the bottom arm of intrinsic value, that’s your perfect buy point. Park the maximum percentage, not your full amount.
· If price declines even further, invest more amount. This is the biggest advantage of a falling market.
What if the price doesn’t touch the bottom arm?
· When your stock price doesn’t touch the bottom arm and moves forward. Use the reverse strategy of investing 10% percentage for each rise in price until it reaches your upper arm interval.
BUY THE STOCKS WHICH OFFERS MORE DIVIDEND:
· Dividend is always termed as rental income from shares. It’s a part of the profit which the company obliges to share with its shareholders.
· Dividend earnings will be a great source income during our retirement and it will the best passive income.
· Good stocks are classified by debt-free and high dividend-paying stocks.
· Bear market will be the best time in the market to invest in more dividend-yielding stocks.
ITC was available at Rs. 134 during the COVID market crash, which is the best price to buy. After the 2020 AGM, ITC announced of paying Rs. 10.15 as a dividend for the current year. Just have in your mind, if you have 1 lakh shares of ITC. You will be paid Rs. 10.15 lakhs as dividend payout.
· This kind of stocks have to accumulate during the bear market. Have a perfect watch list of dividend stocks and purchase during a falling market.
INVEST IN MARKET INDICES IN BEAR MARKET:
· Use the same strategy as buying your stock for indices. Indices also fall as the market falls.
· The best time to buy indices is when the index P/E ratio is between 12-17.
· You can invest on indices by ETF and Index funds.
· Index will grow fast than other stocks and mutual funds. During the COVID – 19 crash, NIFTY 50 touched the bottom of 7900 points. Now it is trading around 11200.
· Nifty 50 has yield almost 42% in just 3 months. So, during the bear market, you take the opportunity from indices too.
There are few other ways to get the opportunity in a bear market like,
· Short Selling
· Put Option.
· Buying call option.
· Dealing with the margins, etc.
These topics we will discuss in future chapters.
Click Here: 10 Ways to Profit in a bear market
· Investor should always have in my mind, the bear market has more opportunities than a bull market.
· Wait for the correct time and have a plan with debt-free stocks.
· This is will be the right time to accumulate high dividend-paying stocks.
· Index will bounce back quickly. So, invest in indices.
· Avoid pain, control emotions and greed.