Strategies to sustain in market during ongoing crisis; Should we exit or should we hunt for best stocks?

We all have been hearing news about the havoc brought by the corona virus in entire economies and stock markets which has made investors anxious with their investments. The very question we ask to ourselves as an investor is Should I be invested in the stock market or get out of it?

Since our own NEPSE has been closed for more than a month now will finally open its floor for trading with 2% circuit breakers and only 2 hours of trading time from Tuesday, May 12. This is a relief to many investors who have been waiting to cash out from the stock market and for those who are loading their “elephant gun” as the legend investor Warren Buffet would call to invest in some wonderful companies at fair prices.

Many of us might be wondering what to do now the market is re-opening. What should be my strategy? Having said that let’s dive into some of the strategies which you can apply during this crisis.

1. Take a calculated risk

Many of us are already invested in the stock market before the lockdown and we all are felling very anxious about our portfolio value being dropped. But in times like this, instead of selling the stock at a substantial loss, you should be looking at the bigger picture. Even though your value might be dropping because of dipping prices, that might be probably because either the investors are fearful or the stock is really performing bad. So, figure out the root cause of the price dropping and if your analysis says that the investors are just fearful then you might want to take the chance and buy the wonderful companies at fair prices like Warren Buffet always suggests.

2. Be greedy when others are fearful 

Many of the legend investors of all time buys when everyone is fearful and self when everyone is greedy which gives them more than average return. It is likely that the investors are going to have the fear of seeing their portfolio value being dropped, but rather than following the herd, make your own strategy and start analyzing the companies that you like and buy it at a bargain when its available. In times like this, many investors are bound to sell their stock because the earnings of various companies are down, but that doesn’t signify their long-term growth. So, look for the companies with growth potential which are being sold at the market just because of temporary fluctuations.

3. Be in the market for long-term

We all dream of being an investor like Warren Buffet but to be like them we have to adopt their philosophies and act on our own strategy. Warren Buffet says, “The holding period for us is forever”. Well for a patient investor like him it is a great strategy. But for some of us it might be hard but the real game in investing is really being in the stock market for longer period of time. And in the times like market crashes, instead of selling, buying the companies at fair prices and staying invested will give you the head start for higher cumulative rate of return. Looking at the history of market crashes it we can be pretty sure that this shall pass too, so don’t miss out on great opportunity.

4. Keep yourself away from the outside news

The best you can do in times like this is to keep yourself away from the news. In stock market you will come up with a lot of experts giving tips. But you should never go onto that path. The best you can do is, shut your news portals and do your own research on the company and invest with your own findings. 

To sum up, you might want to consider these strategies to sustain in the stock market during this corona virus crisis. Don’t follow the herd mentality is what most investors would suggest and which distinguishes successful investors from average investors.

Prajwal Shrestha