loader2
Partner With Us

Should you Buy on dips this time in the Stock Market during COVID?

Introduction

With a massive rise in Covid cases, sharp downside trends are likely to emerge. A volatile stock market could mean different opportunities to different investors. Some investors may buy at bargain prices, while some others may want to pull out their investments in panic. It’s a good strategy to buy low during a dip, but there’s more you need to know.

Different from the First Wave

Last year, paranoia and anxiety were high as there was no recourse or solution in sight to the pandemic. This year, the situation is far different. India has embarked on a massive, ambitious vaccination drive, and hence investor worry is low. Overall sentiments in the second wave are more balanced this time around, not likely to impact earnings severely. In all, there could be a correction in the market, which could be a good buying opportunity for investors with a long-term perspective.

Time in the Market is of the Essence

Despite analyst forecasts and expectation, there is no sure-fire way to predict how the market may move in the short run. But if you consider historical data, it can provide you with helpful context to establish a range of likely outcomes. This is known as mean reversion. As per mean reversion theory, asset prices eventually will revert to the long-run mean.

Keeping a long-term perspective in mind, let's look at four essential factors you need to ensure when investing in the stock market.

  • Long-term investing pays

    If you look back in history, it shows that investors who have stayed invested for several years have benefited the most. Long-term investing has benefited many investors in building wealth and meeting their goals. Therefore, regardless of whether you invest when the market is high or low, avoid paying attention to short-term returns.

  • Delaying on investing could be expensive

    Trying to time the market can cost an investor dearly. But at the same time, if you are afraid of investing because the market is either up or down, consider the value of missing out on good days. You may not want to look at current market conditions to decide whether it's a good time to invest.

  • Rupee cost averaging to the rescue

    When you invest during a slump or a bull run, rupee cost averaging can be an effective way of reducing your investment risk. Also, it can counter the fear of investing at the wrong time. Contrary to the concept of trying to time the market, rupee cost averaging works on the premise that you invest at fixed intervals irrespective of whether the demand is high or low. 

  • It's all about diversification

    At the cornerstone of every risk-adjusted investment strategy, diversification is the key to building and safeguarding your assets. Risk-reward framework, current valuation and asset classes behave differently in different market conditions and over time. Hence, investing across asset classes can reduce volatility and asset correlation in your investment portfolio. Besides, it can also help you cut down the risk of investing a large amount in the market at one go, as asset classes generally perform differently over a period.

Despite the rise in infected cases, India may see a recovery in selected sectors. It is essential to keep those selected sectoral picks in your portfolio to gain in the future. Talk to your financial advisor to see if your portfolio requires structural themes that may do well in the next few years.

In Conclusion

It's essential to focus on what you can control. Unfortunately, since no one can steer or control the stock market, what you can do is control how you invest, especially during downturns. The key to creating and preserving your wealth over the long run is to stay invested and stick with your financial plan. Remember to keep your investment plan in sight and adhere to it when investing. Trying to time the market by hoping for a downturn could leave your financial future at risk.

Disclaimer:ICICI Securities Ltd. ( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Centre, H. T. Parekh Marg, Churchgate, Mumbai - 400020, India, Tel No : 022 - 2288 2460, 022 - 2288 2470. I-Sec is a Member of National Stock Exchange of India Ltd (Member Code :07730), BSE Ltd (Member Code :103) and Member of Multi Commodity Exchange of India Ltd. ( Member Code : 56250) and having SEBI registration no. INZ000183631. Name of the Compliance officer (broking): Mr. Anoop Goyal, Contact number: 022-40701000, E-mail address: complianceofficer@icicisecurities.com. Investments in securities market are subject to market risks, read all the related documents carefully before investing. The contents herein above shall not be considered as an invitation or persuasion to trade or invest.  I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. The contents herein mentioned are solely for informational and educational purpose.

Most Popular

f
  • 27 Sep 2021
  • ICICI Securities

The Five Rules of Investing in Equities

Investment in equity should be made by following certain rules. There are five rules of equity investments. They arise from an understanding of the stock market and mitigate the chances of making mistakes and incurring losses.

  • 27 Sep 2021
  • ICICI Securities

Investment Rules: 5 Thumb Rules of Investing in Market

While you work for money, suitable investments make your money work for you. How you take control of your finances determines the growth of your wealth and additional income streams. Click here to read about the five golden rules you can follow while investing.

  • 15 Sep 2021
  • ICICI Securities

5 Most Popular Reasons for Switching Bank

In the beginning, you would hear from them quite often. But of late, you're noticing more and more signs that it's no longer working. We are referring to your relationship with your bank. Click here to read how to recognize the red flags in your banking relationship and why it might be a good time to end the bond.

  • 15 Sep 2021
  • ICICI Securities

How Intraday Trading Works? Detailed Ideas

Intraday trading in India has been gaining momentum of late. It is no longer the option of only trade pundits.

  • 15 Sep 2021
  • ICICI Securities

What is Intraday trading? A Beginner's Guide

With the advancement of technology and increased knowledge about the stock market, trading is no more a domain dominated by stock pundits.

  • 05 Sep 2021
  • ICICI Securities

Is it Good To Invest in Cyclical Stocks?

Akin to how the pedals of a cycle go up and down as it moves forward, the share price of certain stocks goes up and down in accordance with the economic cycles a country goes through. 

  • 05 Sep 2021
  • ICICI Securities

A primer on Fixed Maturity Plans

If you happen to have some surplus funds which you don’t need for a specific period, but you don’t want to take the risk of investing this money in the stock market, you can very well put this money in a Fixed Maturity Plan or FMP. 

  • 05 Sep 2021
  • ICICI Securities

How to Choose the Best Equity Mutual Fund

You must have heard a lot about investing in mutual funds. But before jumping on this trend you need to assess a mutual fund scheme according to your goals, investment horizon, risk profile, liquidity needs and many other factors to find a suitable match. 

  • 05 Sep 2021
  • ICICI Securities

A Beginner’s Guide to Monetary Policy Tools

The Reserve Bank of India has the incredibly crucial responsibility to formulate the monetary policy. The main objective of monetary policy is to control inflation and provide a conducive environment for the country's economic growth. 

  • 05 Sep 2021
  • ICICI Securities

Buying Penny Stocks and its Risks

There is a specific category of stocks whose prices are very low and they seem to yield exponential returns. But do you know that investment in such stocks could be risky? 

Open an Account

Sign Up for Free

+91

Please use the mobile no registered with Aadhaar.

OTP sent to +91 1234567890

Didn’t received OTP? Resend

00:30

iciciDirect-money-logo
iciciDirectMoney-App

Get Research Backed Recommendations.

Download The app now

or Scan below QR Code To download app

QRcode