There always seems to be a fear of the Bear market in general because many of the investors lose their hard-earned money during this time. Value investors have no qualms in investing in a bear market because the bear market reaps them maximum profits. Many value investors consider the Bear market as an opportunity t make huge profits. High-profile investors like Warren Buffet consider the Bear market as the right time to receive snatch quality stocks at price lesser than their value.
Opportunity In A Bear Market :
There’s no denying that investing during a Bear market phase is playing with fire because one misstep could incur a severe loss. It’s not very easy to motivate ourselves to invest in stocks in times when all the prices are falling. Firstly, the goal should be only to buy fundamentally stronger stocks during the bear market phase. This is a time to amass blue-chip stocks of the market.
The climate is uncertain in the bear market. There are more stock sellers than their buyers. The majority of investors prefer to sell their shares once the index begins to decline. This eventually leads to a panic situation in the market.
It is not wrong to claim that stock-selling is a reflex activity caused by the bear market. People are attracted to selling in order to avoid more losses. That is reasonable Since the figures are overwhelming when the economy falls. SENSEX dropped from 20,000 to 8,500 levels in 2008 (down -57 percent ).
How To Make Money In Bear Market :
Retail Investors can make more money in a bear market compared to a bull market. Investing is suggested for retail investors rather than trading. If the bull market is for day exchange, the bear market is for investing. Every value investor loves the bull market because investing in those times is easy. One crucial skill is necessary to invest during bear phases, and it is the ability to identify essentially strong stocks.
If one can acquire this skill, they can invest in bear market and make remarkable amounts of capital. The climate of the bear market is also suitable to start investing if one has the idea to become a long term investor. In a bear market, a stock which is generally traded around Rs.100 can fall up to Rs. 65. A wise investor will know to capitalize on this situation and will buy the stock.
When the market condition becomes stable, the trader might see an increase in the price of at least 10- 15 per cent in the upcoming months. In stock marketing, a price increase of 10-15% in such a small amount of time can be considered exceptional. A longer time can give even higher profits.
If an investor is holding a dividend yield stock, the profit can increase by two times. In a bear market, dividend increases. As a matter of fact, such stocks also show a faster increase in prices.
Falling market may sound scary obviously, but it is the right time to make a profit. If your money is already advanced in a pre-crash stock market, leave it as is. Don’t give in to your impulses and sell them. Once the economy recovers you can determine if you still want to sell it or keep it.