How to invest when Market is Down ?

How to invest when market is down How to invest when Market is Down ?People say the market is like the sea, when they say so, it is not limited to the comparison in size of both. Just like the sea has low tides and high tides, the market will have such a phase where it will be high on certain days and low on the other. Nevertheless, no matter how the market is performing, it is business as usual. As an investor looking to invest in the stock market when it is down, here are seven tips that can help you.

  • Don’t let the market condition get to your head:
    Don’t avoid stocks because of the downturns; they produce excellent long-term returns. Risk and return are inextricably linked. You must be willing to accept risk if you want wealth-building investments that provide superior long term investment returns (that is, volatility and down periods). To reduce your risk, you should take reasonable precautions, with diversification being the star of the show.
  • Diversification is key:
    In a down market, having a diversified portfolio can help because some investments will rise while others fall, balancing the losses. Even if the market falls 20%, your portfolio may fall by a much smaller percentage if you are well-diversified.
  • Don’t buy stocks just because they come cheap:
    After a significant decline, you should not buy any stock at random. When technology stocks began to fall in value in 2000, some investors made the mistake of buying more of them as prices fell. What such “buy on the dip” investors failed to recognize was that the technology stocks they were purchasing were still grossly overpriced when measured by price-earnings ratios and other valuation measures.
  • Know what’s wrong with your portfolio:
    Stock market declines can quickly expose problems in your best stock portfolio, such as having too many investments in the same industry. A declining stock market can expose the high fees you may be paying on your investments, in addition to revealing poorly diversified portfolios. Fewer investors are concerned about being stung with fees of, say, 2% per year when they are making 20% per year. However, after a few years of low or negative returns, such high fees become quite painful and noticeable.
  • Stay away from growth stocks:
    During a prolonged stock market decline (bear market), the stocks that suffer the most tend to be those that were most overpriced during the previous market rise (bull market). In each bull market, specific types of growth stocks, such as Internet companies or biotechnology companies, can be especially hot, similar to fads such as hula hoops, Cabbage Patch Kids, and Beanie Babies.
  • Don’t consider large point declines:
    Consider the percentage decline of an index rather than the point decline. Although a drop of 200 to 300 points sounds like a huge drop, it equates to a move of about 1 to 1.5 percent for an index that trades around 18,000. No one wants to lose that much of their wealth in stocks in one day, but the percentage change sounds less frightening than the point change.
  • Do your own research about the financial market:
    When things get tough in the falling stock market, it’s easy to lose perspective and make rash decisions. Instead, you must have the long-term perspective required to succeed in stock investing, as well as a thorough understanding of how financial markets operate.

Irrespective of how the market is performing, one needs certain services and tools to invest effectively in the Indian stock market. Demat account, Trading account, Online trading platforms with analytical tools are top 3 essentials for a trader. Tradeplus provides Demat and Trading account at absolutely ‘Zero’ cost. Apart from these, we also offer one of the best brokerage services in the form of flat fee discount brokerage.

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