We are living in interesting times. A large number of stocks (about a third) have fallen by 50% and a similar number by upto one-fourth%. The BSE Sensex and Nifty have not yet fallen by 20% which is technically the definition of a bear market.
No one knows if the market will fall further. India’s Market Cap to GDP ratio is 77% now. It was 96% in January. During the 2008 crisis, it fell all the way to 64%. This seems to indicate that we are entering a bear market.
But there are chances are it may fall further, given that US broad markets have not yet seen a massive correction. The full impact of retail investors stopping SIPs is not yet seen. We will know when there will be daily whatsapp memes on falling stock markets.
Is it a good time to invest?
- If you have liquiditiy (ie cash on hand) that is in surplus of your living expenses and short term goals (2-3 years worth based on your risk appetite), then ADD MORE to equities now. It is a good time to start or accelerate buying now.
- If your asset allocation (again based on your personal risk profile and OVERALL investments) allows you the ability to add more to equities, then now is the time. Often people with large cash balances in FDs or real estate portfolios do not seize opportunities that come up.
The time to act is now, it is not enough to read about stuff and do nothing. If you need help, do talk to a SEBI Registered Advisor.
If you are adequately invested and have a good asset allocation then, DO NOTHING. Do not panic and remember that this is part of the market cycle.
Finally, there are only two ways to get wealthy:
(1) Spend after you save a big chunk of your income and
(2) Keep investing consistently, topping up when there are opportunities.
Of course we assume that you are investing with the help of a trusted platform that offers only direct plan mutual funds and doesn’t play tricks in the name of ‘free’.
