Tips for Buying in a Bear Market

Tips for Buying in a Bear Market

When the waves are crashing hard against the shore and the sailing boats quiver amidst the brimming storm, the old wisdom would suggest waiting in the safety of the homes till the calm morning arrives. But what if the stormy night is full of unexplored opportunities that would vanish with the soothing beam of sunlight? The investment dilemma in the existing downtrend market situation similarly appears to imitate the wavering thoughts of the sailing investor whose mind battles over the lucrative prospects and the risky investments. 

The growing pace of uncertainty surrounding the health appears to surpass even the deadly disease that in a span of few weeks has affected a large population in China and across the world. The confusion pertaining to the investment currently has taken a gigantic form as the coronavirus fear seems to transform into a pandemic, affecting our action in every walks of life.

The market that over the past seemed to deliver reliably consistent performance has suddenly shrunk, sending a ripple effect to different sectors. Such market correction stemming into the bear market is often seen as the indicator of the economic downturn.

In the existing depressing market conditions plagued by the impact of coronavirus, although the investment activities may generate scepticism, the right investment may prove to be highly valuable for the future.

Warren Buffet quotes “Beware the investment activity that produces applause: the great moves are usually greeted by yawns”.

Not every time the luscious market may demonstrate green signs for the value investments and even the troubled times may offer golden opportunities. 

Have you ever felt a surge of euphoria as you came across the ‘Sale’ sign plastered over the retail store, sending you to a shopping spree to purchase various discounted items? While the stock market does not hoard any such flashy neon Sale sign, the market corrections may intrinsically represent the discounted stocks that you might be eyeing for long. When looking at the stock market corrections, one may find various attractive alternatives that promise glittering prospects. 

Taking into note the coronavirus lead downtrends in the markets, here are the tips for capitalizing on the attractive investment opportunities in the current bear market:

Seek Value Investing

The common purpose of profitability motivates your efforts devoted to all the stock market research leading to the investment decisions. The value investing, which is considered as the building blocks of the profitability, is often sought-after by the investors. It involves choosing the stocks whose market value seems relatively lower than the intrinsic value.

When planning to evaluate the intrinsic value of the shares, your evaluations should not be limited to the overall market performance of the stock but also incorporate the future prospects and other relevant details.

Although the value investing employing the comparative method appears to be a one-step approach, it typically involves prudent judgement along with the correctly aligned analytical skills. However, scanning such stocks in the extremely competitive bullish market presents a highly challenging situation.

The market corrections driving the bearish trends can be your potential opportunity for ensuring the value investment. In the bear market, you may get effective price bargains even for the prominent stocks that offer high value to the shareholders in terms of dividends or substantial appreciation potential. 

Pick Out The Sectors Not Heavily Bearing The Brunt Of The Crisis

With epicentre at Wuhan, the outbreak has currently spread across different nations affecting businesses, economies, financial markets and consumers. As the uncertainty begins to grapple our core belief, we place bets over the worst possibilities leading us to submit fully owing to the marring impact of the disease.

Despite the detrimental nature of the outbreak, the chances are that some sectors may not be heavily impacted, thereby quickly reeling back from the impact of the Covid-19. 

Moreover, the sectors such as consumer staples and healthcare either catering to the necessities or emergency-lead requirements may present prospective investment in the future. While the market uncertainty may have currently gripped such sectors, the prospects lie that such areas would soon emerge from the market sufferings created by the medical emergency.

The identification of such segments alongside the digging into the future profitable stocks can come as a harbinger of joy in the coming time.

The investors, when evaluating the investment options could prefer sorting profitable sectors and areas. While the scenario currently may appear grim throughout the stock market affecting the different industries, many players owing to their strong predisposition would be quick to emerge from the tornadic swirls as soon as the storm of coronavirus would start subsiding. 

Scan for Stocks with Strong Fundamentals 

In times of hardships, when the withered leaves fall, often the tree with deep roots survive. Similar stands the relationship between the stock and its fundamentals as the latter affects the stock performance of the company.

Although you may rely on the technical analysis for tracking the movements and trends for a stock, the foundation triggering the movement can only be evaluated by digging deep into the company’s operations, financials and activities. 

While the stock market corrections sparking the bearish trends is snatching away your optimism, the company’s past financial performance and the recent operational endeavours can offer glimmering hopes.

Warren Buffet highlights, “In the business world, the rearview mirror is always clearer than the windshield”.

The fundamental analysis sure is a useful tool that provides a glimpse of the future potential through the lens of the past performance. The revenue stream, profit-making history and the current cash flows of the company go a long way in providing understanding regarding the health of the company that ultimately affects the stock performance. 

Invest for The Long-Term Harvest

You might be the aggressive investor who would dream of suddenly turning your fortune by the smart investment moves. However, not all scenario favours the same strategies, and sometimes you are required to shed away your predisposed prejudice for safely ensuring profits.

As the coronavirus cases seem to accelerate, encompassing different markets, the sentiments appear to hit rock bottom. In the existing bear market, the buy-and-hold strategy can be your potential weapon for fighting against the downtrends. 

The investment in the dividend stocks or diversified stocks through mutual funds/ETFs can come to your aid when planning for the long-term returns. The long-term investments are potentially shielded from the detrimental market downturns can be effectively purchased in the existing bear market at a relatively lower value.

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