The whole world has been badly affected by the spread of the virus forcing companies to shut down, heavy unemployment and huge downfall in the economy. Almost all major most economic activities have impacted by the disease. The markets have been heavily damaged by the Covid19 and the effects are visible on the global economic growth. Today the whole world is struggling from the effects of the Covid19 on business and trade. For the past few weeks Indian Stock markets were seen crashing into a bearish phase where the stock prices fell more than 20% from the recent highs. Although, the market has slightly started to rise gradually such sudden fall in stock valuations and other instabilities have triggered panic across the world and shaken the confidence of investors. The past Friday turned out to be in favor of the investors.
In bearish times most of the investors opt-out of the securities they were holding and are ready to sell their investments at a lower price. There is, generally, a lot of pressure upon the investors as well as on their financial advisers. One wrong decision or miscalculation could lead to a major financial loss. In common parlance, this situation is very stressful and involves a lot of decision making. But, despite all such risks in investments such scenarios can actually prove to be a good chance to reap some good alphas and it might not be incorrect to say that no matter how much villainous this phase looks like, it might offer you a good opportunity to earn.
Through this article we would like to highlight the ways you can earn profits even in such times of stock market crash.
Good Stocks at Affordable Rates
Legendary investor Warren Buffet had once stated, “Whether we’re talking about socks or stocks, I like buying quality merchandise, when it is marked down.” This is what happens in a bearish market. The prices of all shares both good and bad tend to fall down, opening a window to invest in lower than normal rates. As more people invest in such securities, the prices tend to recover and the growth is set back to the track. Investment professional prefers investment in high performing- financially strong stocks with relatively higher earnings & profitability, solid balance sheets, bigger cash flows, and more effective management should be preferred. At the same time, professional advisers also suggest equity investors alter their portfolio allocation towards large-cap and multi-cap stocks as the market correction might be a little prevalent in the short term.
Better Investment Options Become More Visible
As we have seen, the bearish markets are always preceded by tough economic conditions. In a difficult environment, the corporate may struggle in paying their debts and other liabilities highlighting their creditworthiness. The creditworthiness is often rated by various independent credit rating authorities. When such reports declare a good report, it means the organization is financially sound and is a good shot to take.
In short, we can summarize that the bearish phase is comparatively shorter than its counterpart, i.e. Bull. Therefore, the impact of the bearish market upon the securities doesn’t sustain for a long time. The good companies having great creditworthiness shine in the bullish market following the bearish phase. So, the advice to invest in falling markets is highly justified subject to risk & careful. It might also be suggested that this might be a good time for long term investors to buy high valuation stocks at low levels. For making a profitable investment and subsequent appreciation in the investments value few conditions shall be seen such as high-profit margin stock, low debt and innate capability & financial soundness to sustain even if the share prices touch the rock bottom due to instabilities.