That’s the question I got from an investor. Another one said, “looks like we have reached the bottom. Time to invest more, may be over a few days?”
I welcome the positive sentiment but with great caution.
It may be the bottom yet. It may NOT be. I don’t know.
However, if we are to rely on what happened in the recent memory…well, as recent as 12 years ago, in 2008, we have a possibility to consider.
Between Jan 2008 and March 2019, stock market indices corrected by about 60% from the highs then.
The current fall has been about 33% so far from the highs. Even a small piece of bad news can push this further.
I tell you this fact not to scare you but to help you see rationally.
Having said that, it is also true that no one can predict, let alone accurately predict, what is going to happen in the next few weeks or months.
Don’t dive in with all your money.
What if the markets rebound? Would I miss this buying opportunity?
Well, FOMO (fear of missing out) is inevitable.
You should also know that it’s the losses that cause us more pain. That missed out gain is not so hurtful.
So, be cautious. If your allocations allow, keep investing systematically, gradually. You may not catch the bottom but you will not lose out big on the gains as well.
For those doing their SIPs, just keep going.
If you have a lumpsum, invest over a period of time. There are many formulae given out as to how to approach lumpsum investing. Here are some ideas:
- Of your lumpsum, invest a % equal to the market fall or double the % of the market fall. So, if the market has fallen 30% so far, you may want to invest 60% of your lumpsum now.
- Spread out equally over the next 6 months, may be a weekly STP from your debt fund to equity fund.
The key focus is on avoiding pain in the immediate term. The gains will take care of themselves.
Let me give you my final warning. This is not the time to sell your house or take a loan to invest in the stock markets. Absolutely not!