Recession | Investing In Stock Market

TWO THINGS TO KEEP IN MIND BEFORE INVESTING IN STOCK MARKET IN RECESSION

Strategies to win during Economic Recession.


This year in January Sensex was at around 41,306 and now April end it has fallen approx 25% due to bad economic condition. If we talk about Indian economy in current scenario is is going through a very bad times due to such massive lock-down, which led to companies revenue to fall and many companies revenue has come to almost zero.

In this situation we are also seeing many new people coming up and trying to invest into stock market as quality shares are available at low prices. In value investing it is said that when u get any good companies shares at low prices u should buy it. Thinking this only many people are doing the same and investing but the current phase completely different  from past economic crisis.

In this phase we should keep two things in mind before investing in stock market



Firstly :  Keep your Emergency fund and Investment funds separately.

Lock down has started from 25th March in India then total number of cases at that time were 1618 in past two months instead of decreasing cases has been increasing sharply & currently it has crossed more than Thirty seven thousand because of which companies revenue fall has fallen too and when companies starts
facing problem then slowly slowly those problems starts spreading other places too,due to no working operation revenue has fallen a lot but their expenses are same as it was earlier they are still required to pay their rent, salaries and many others in these scenario big companies might bear the problem for certain time frame but by cutting its cost like that can leave some of their office places, fire some employees and they may decrease the salary too. On the other hand small companies or newly emerged business shall face many problems and come to shut down.
In Past six months in U.S more that 3 Crore people have claimed themselves as job less due to firing from their jobs.

As cases are increasing leading to lock down extension (now from 4th of March to 17th March)
in India too we can see lay off and it has started also. Firstly to do so is airlines companies many employees recently have been fired and many others sector also we can see the same.

In these situation it will be very hard to find new jobs hardy 2 to 3 percent companies are hiring and
 most companies either
have stopped their hiring process or started firing, people are loosing jobs as companies have
started cost cutting. Companies will take approx 6 to 8 months to recover the loss which incurred in last two months so therefore companies won't start their hiring process people who will loose their
jobs and will also face enormous other problems too. During this phase EMI and other expenses shall give them much trouble.

So don't be in a hurry to invest in Stock Market, one should have a backup of 8 to 12 months of financial backup which means if you loose your job of start facing looses in your business you should have a strong financial backup to bear your expenses for a year or more. So first keep aside the money for such expenses you can call this fund as emergency fund and if any amount is left then you can thinking of investing into stock market.

Doing an investment is very good as it helps you to become financially strong and it also helps the economy to grow by lending money to companies to grow the economy by growing themselves but in current scenario economy is going down companies are facing many problems you should have a financial backup. 2020 Market crash is very different from other economic crisis so don't be in a  panic just be aware of everything and instead of being reactive we should be proactive

If you see from past 20 to 25 days stock has recovered a lot because of which many people are thinking Indian economy has started recovering but it's not true most businesses are in a complete shutdown. As Benjamin Graham said in short term stock market is a voting machine where everything is uncertain but in long term it works like a weighing machine means in long term it shows the true reality of economy so don't trapped or fooled that economy is recovering until corona virus is not controlled or vaccine doesn't show up it is hard to say anything so be optimistic but keep a financial back up too..




Secondly  many people are using stock market
as a source of quick income or using market as a place for fast income but be aware the stock market is a place of companies to raise funds as Benjamin Graham says  in short term stock market is a voting machine and long term weighing machine so companies business share price is followed by its business performance and growth this is long term game not short term and we can see whenever recession comes at least
2 to 3 years it takes to recover from the damages faced before or then. So if your thinking for very long term then only you should invest in stock market otherwise don't waste your time or loose money in search of quick income.

Hoping that these two advice will help you before investing in stock market in this period.

Share it with your loved once so they may not face the same problem.

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