Friday, February 23rd, 2024

How risky is it to buy shares in a falling stock market? Know what investors should do


Photo: File stock market

You will say, what a pointless question. Traders will short it, and investors will buy good shares in the deep. Here we will talk about investment. At present, the market is going into the bear phase, that means the market is in a downtrend. Just as a melon changes its color after seeing it, in the same way, the fall in the American stock market is slowly affecting the global market as well, and the Indian market is no exception to it. In such a situation, two questions arise in front of long term investors, should they put the money in mutual funds or keep buying good shares gradually.

To invest money in shares, you should have maximum information about the company, which is usually less with new investors. They buy penny stocks in droves, and then wait for them to double, triple. That day never comes, on the contrary, seeing the stock falling every day, they become disheartened and leave after cutting the deal at a loss, that is, they sell their shares for a quarter of the price, and keep cursing the person who gave the tip for the rest of their life.

What would be the right thing to do in such a situation?

Either pick good stocks, or blindly go on investing money in index funds. For new investors, the second method would be better. Let me explain to you with a great example. At the time of Corona, the stock market had come down by about 35 percent. Nifty 50 was above 12 thousand at that time, it fell down to reach 7 and a half thousand. In such a situation, whoever had put money in index fund slowly, his money was doubled in just two and a half years.

safest way to make money

Let us understand this with an example. Due to Corona, the Nifty 50 had come down by about 4 thousand points in about one and a half months between February 17 and March 30, 2020. Everyone’s hands and feet were swollen. In such a situation, some people even stopped their SIP. And some people started putting money through lumpsum on every 2 per cent fall. There were also some people who went on pouring money up to the level of 7,500. That is, they put maximum of their money at the bottom level. Its result is in front of everyone. Now the market is at the level of 17 and a half thousand after about two years. That is, in terms of the level at that time, it is at double range. Suppose that his average price investment was 8.5 thousand, then according to the current level of Nifty 50, his index fund money has doubled.

Now you will say that the brother who would have bought good shares at that time, his money did not double but tripled. This is absolutely true. But people who are completely new, how do they know that the shares which had fallen even by 15% from their current price at that time, were they really worth buying? Why didn’t you get into thinking?

Consider this latest example of saving money

Bajaj Finance which has been a multibagger stock (it should not be considered as any kind of recommendation, this stock has been taken here only for example). . So the question arose in everyone’s mind whether this stock should be taken. Some people did swing trading. Because such stocks fall one day and rise the other day. The people who invest also fell in this greed. But the opposite happened. The next day also its stock came down by about 2%. Now such investors got trapped in the trap, who invested maximum money on the 7% fall of the first day.

Understand the reason for getting trapped

This share is expensive even after a fall of about 10% in 2 days. Its current price is still higher than its intrinsic value. The PE ratio is also 52 which is 30 points higher than its sector PE. PB ratio is also 4 times more than Sector PB. Therefore, this stock is not worth taking at the moment in terms of investment. But it is important to keep an eye as this stock has also given multibagger returns. If you had taken this share 20 years ago, then a share of Rs 4 at that time would have crossed Rs 6000 today. That means you would have got a return of 137697%.

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