3 Reasons Why We Should Invest in Falling Markets?
Recently the Indian Stock markets were seen crashing into a bearish phase where the stock prices fell more than 20% from the recent highs. Bear markets occur during economic recessions or depressions when pessimism prevails. In such markets, the prices of the securities drop heavily, and a negative sentiment causes a selling pressure upon the current which force the prices to stoop down even further.
As a general human behavior, most of the investors opt out of the securities they were holding and are ready to sell their investments at a lower price. This situation is often seen with a skeptical point of view. There is, generally, a lot of pressure upon the investors as well as on their financial advisors. One wrong decision or miscalculation could lead to a major financial loss. In common parlance, this situation is very stressful and involves a lot of decision making. But, despite all such risks in investments such scenarios can actually prove to be a good chance to reap some good alphas and it might not be incorrect to say that no matter how much villainous this phase looks like, it might offer you a good opportunity to earn.
Good Stocks at Affordable Rates
Legendary investor Warren Buffet had once stated, “Whether we’re talking about socks or stocks, I like buying quality merchandise, when it is marked down.” This is what happens in a bearish market. The prices of all shares both good and bad tend to fall down, opening a window to invest in lower than normal rates. As more people invest in such securities, the prices tend to recover and the growth is set back to the track.
Better Investment Options Highlight Up
As we have seen, the bearish markets are always preceded by tough economic conditions. In difficult environment, the corporates may struggle in paying their debts and other liabilities highlighting their creditworthiness. The creditworthiness is often rated by various independent credit rating authorities. When such reports declare a good report it means the organization is financially sound and is a good to shot to take.
In short, we can summarize that bearish phase is comparatively shorter than its counterpart, i.e. Bull. Therefore, the impact of bearish market upon the securities doesn’t sustain for a long time. The good stocks of companies having great creditworthiness shine in the bullish market following the bearish phase. So, the advice to invest in falling markets is highly justified subject to risk & careful