What to do when stocks are going down? | Bear market strategy
What to do when stocks are going down? | Bear market strategy
Hello Investor,
After a long time, I came back with a brand new article.
What do you prefer during ongoing market volatility or rising bearish sentiment?
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Hold then you want to sell before your stocks depreciate further?
This is a very subjective thing that depends on nature, psychology, and behaviour. There might be someone who is averaging down in a currently falling market, and there might be someone who is reinvesting in a quality business to sell off their non-performing stocks. And some also follow the low philosophy of "don't try to catch a falling knife". Everyone has their strategy regarding the market.
The stock market has been going high for the last 6 months and there has been a lot of change in our portfolio of all of us. So in such a situation, we remain confused as to what we want to do.
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So, in today's special edition of "Viral Reacts," we show you what to do when your stock goes up. And this is not us, We will tell you about famous market experts like Warren Buffett, Peter Lynch, and Shankar Sharma.
We will know what strategy they follow when the market moves in the markets. So let's start with the legendary investor Warren Buffett.
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Warren Buffett
Warren Buffett is an American investor and philanthropist. He is also currently the Chairman and CEO of Berkshire Hathaway. Buffett is also considered the most successful investor in the world.
Warren Buffett is telling that if the stock is falling down, then it is excellent news. So as you just saw, Warren Buffett tells that whenever the stock price is going high it is good news for investors, especially for investors who are net buyers like him most of the time. According to them, if you are afraid of falling share prices, then the stock market is not for you.
If you are confident about the business and in times of recession, we get the shares of the business to you at a discount, then according to Warren Buffett, this is very good news and you should buy more stocks.
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Warren Buffett is one of the wealthiest men on earth.
His mentor, Benjamin Graham, shared what he taught Warren in his book, The Intelligent Investor. Here are 10 simple lessons from the book to make you a better investor:
- "The intelligent investor is a realist who sells to optimists and buys from pessimists."
- "In the short run, a market is a voting machine but in the long run, it is a weighing machine."
- "Those who do not remember the past are condemned to repeat it.”
- “Investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”
- “People who invest make money for themselves; people who speculate make money for their brokers.”
- “You will be much more in control if you realize how much you are not in control.”
- “Plant trees that other men will sit under.”
- “Abnormally good or abnormally bad conditions do not last forever.”
- “The investor's chief problem - and even his worst enemy - is likely to be himself.”
- “Intelligence has nothing to do with IQ or SAT scores. It simply means being patient, disciplined, and eager to learn.”
Next is Peter Lynch.
If we talk about Peter Lynch, then the manager of the Magellan Fund, he generated an average annual return of 29.2% between 1977 and 1990, which was consistently twice that of the S&P 500 Index, which is the world's largest.
Peter Lynch has a denial that the reforms in the stock market have come before and will continue to come. Taking data from the last century shows that volatility is the nature of the market, and market falls are bound to happen. Every investor needs a solution and has to accept this. And if you're not ready for market falls, you probably shouldn't own stocks.
Lynch says that market corrections are the only opportunities to earn extraordinary returns. We are often offered relatively attractive valuations of fundamentally strong companies. But now let's see another clip of Peter Lynch where he tells about a mistake that all investors often make.
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As you may have just seen, Peter Lynch says that many people end up buying stock during a market correction because they think the stock won't go down.
For example, if the price of a stock moves from ₹100 to ₹70, then the right investor will use it to think that the stock has fallen significantly and will only go up from here. But do we ask ourselves this question, why is this stock going down? We don't do that. And knowing the answer to this question can make us better than an average investor.
Peter Lynch's experience, why we are buying a stock and the underlying business solution behind it is a must. When these 2 are clear, then we will be sure to decide whether we should buy more stocks during a market correction. Remember that there is no dearth of examples in history when big companies got delisted and investors just say "How much more will it fall?" And keep investing in it.
So though you should buy stocks at a discount at the time of market correction, but only after doing due research. Peter Lynch has given a very insightful quote about this before.
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And let's move on to the last Shankar Sharma's thoughts.
Shankar Sharma is a veteran investor and the founder and joint managing director of PMS company First Global. He has decades of experience in the field of investment. Shankar Sharma gives very unconventional but practical advice.
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Shankar Sharma says that investors should exit their junk stocks at the time of selling in the market. It is generally believed that you should buy only stocks when the market is going down and if you have any junk stock in your portfolio then it is generally suggested to sell in a bull market to get some return on it.
But Shankar says that we often end up buying junk stocks during bullish times, which need to be exited during falling markets. You should invest the capital gained from selling your junk or underperforming stocks in strong and market-leading companies. Because at the time those companies would also be getting a lot of discounts.
So these are the insightful thoughts of Warren Buffett, Peter Lynch, and Shankar Sharma on what investors should do when a market falls.
Through this article, we try to give you a fresh perspective to enhance your understanding of financial markets. Whose advice did you like the best, tell us in the comments, and don't forget to subscribe to the Dev Invest Notes.
We will bring back such interesting videos for you soon.
Happy investing. Bye!
THANK YOU
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