Investing during Crash - 2: Plan to invest in Market leaders
Originally published on Mar 25 2020
Hi Friends,
In continuation with our previous post, we will be discussing plans to invest during market crash.
The current time is tough on whole humanity, but as I said in last post, "This too shall pass". So urge you to keep your family safe and follow rules, now coming back to the plan to invest in crash. Let's start in.
First thing first about investing in crash, it is foolish to predict the market bottom during these times, we may well above of bottom right now or there can be 50% fall in next 6 months, so let's not go into prediction or try to time the jump onto stocks. Since we clearly don't know how future events will impact the economy.
Now coming to what we know, the history tells us that people tend to leave stocks at the slightest hint of any crisis and jump back to it at the smallest positive news. And as we discussed in last post, the crisis usually takes 6 months to one year before is recovers completely and the market always react to it in advance, with this information, here is a simple plan for all our readers.
Let's say you want to invest Rs. 100/- in market today. Here are three scenario you can use to deploy your cash in Market leaders. Let's take the current NIFTY, which is at 8300 today.
Take the bear case:
Invest 25% of money today (Nifty is off 30% its peak, once in a decade situation)
Invest next 25% at fall of 15% from here - (NIFTY at 7100)
Invest next 25% at fall of 10% from there - (NIFTy at 6300)
Remaining 25% hold till market comes back to today's level (NIFTY at 8300)
Take the bull case:
Invest 25% of money today (Nifty is off 30% its peak, once in a decade situation)
Invest next 25% at gain of 15% from here - (NIFTY at 9500)
Invest next 25% at gain of 10% from there - (NIFTY at 10450)
Remaining 25% hold till market drops back to today's level (NIFTY 8300)
Take the sideways case:
This is the toughest of lot, and may be the case in real world, since market can remain dormant without showing either a bearish or bullish sign for years, In this case as well
Invest 25% of money today (Nifty is off 30% its peak, once in a decade situation)
Do not rush to invest your money if NIFTY gain/ fall is not according to your plan.
With Upstox 3 in 1 account, you will anyways get 6% interest on your trading capital so stick to it, invest only when its coming in your plan.
We will keep posting market directions (69% accuracy as of today) for your benefit.
IF you see, with all these plan we are looking at investing 25% of capital today, which is risky bet but with the reward in favorable condition, its certainly a better strategy.
We understand many of you would now want a list of stocks where investment can be made straightaway, we would suggest you to do your own study with NIFTY50 stocks being the universe, We would certainly publish Market leaders stocks of NIFTY50 by this weekend, but that will be purely on fundamentals with no recommendation attached to it.
Note: Do not invest your money in penny stocks, runaway stocks, hot tips etc. These may never recover at all. Stick to NIFTY 50 stocks for time being, nothing else is sorted as NIFTY 5O stocks.