Stock market crash is a sudden big decline of market indices in a single day or few days. During a market crash when investors see their portfolio decreases, that’s how panic start. We all know the basic quote of investment “buy low and sell high”, still a market crash cause fear among us. In this article, you will get to know important reasons of why you should buy stocks during a market crash. Apart from this, if you want to learn about how to forecast stock market movement in details you may join share market course in kolkata.
How to Survive a Stock Market Crash?
Though bear market sounds like losses and recession, there are many hidden opportunities are there. All you need is to find them and invest your money to get higher return in future. Market crash always comes suddenly. So, the first thing investors should do is to control their emotions and act wisely. Here, are the few points every investors should keep in mind to survive in the stock market.
- The most common mistake some investors do during market crash is to sell stocks from their portfolio with strong fundamental. You must hold good fundamental stocks even in the recession period. One thing you can do is to averaging the stocks at a lower price during the market correction.
- Try to arrange some cash during the market correction period to buy good quality stocks. Like, many investors lost opportunities of buying shares on the market crashes because of deficiency of funds.
- Look for the company stocks that don’t change much during a market crash. Stocks that have less effect of the recession period are the most stable stocks. You can invest on those stocks after analysing balance sheet, cash flows and competitive market condition.
- For long term investment checking the fundamentals of a company is always essential. Fundamental analysis must include revenue, balance sheet, cash flow, value analysis, financial ratios, company events and all. For example, a company with gradually increasing revenue over 3-4 years is better than a company with sudden revenue hike. Also, focus at the companies that produce quality goods and services at minimum cost.
- Investors may suffer heavy losses if they sell good fundamental companies stocks during a market correction. So, selling the winning stocks will increase your losses. Therefore, avoid the mistake by selling winning stocks during the market a crash.
- Another important suggestion is to diversify your investment portfolio among equity, gold, mutual fund, and fixed income instruments. It helps to maintain a balance in the volatile market. It also enhances the safety percentage and reduces the risk.
Top Reasons to Buy Stocks during a Stock Market Crash
If you are a good stock market analyst, you may detect the market crash in the initial phase. That could be bliss for you. First decide which stocks you want to get rid of and which stocks you want to buy during the recession. There are many ways by which investors can take advantage of the market correction period. Here I explain the top reasons to buy stocks during a market crash.
- If investors act wisely, by continuing to buy stocks and not selling the whole portfolio, the more market recession they experience as an investor, the higher the profit making probability they have. In another terms, underperformance in the stock market can leads to over performance in future. So, during the period, buying stocks at cheap prices can be a great opportunity for investors.
- As we know that share market fluctuation mainly depends on the investors’ psychology. Most of them buy on greed and sell on fear. Therefore, the main point is that many investors do just the opposite of what they should do. When shares are going upward direction, they buy out of greed. Reversely, when shares prices are going downward, they sell out of fear. So, buy shares when everyone is selling and sell shares when everyone is buying.
- Look for high dividend paying stocks after a market crash. The reason is you will get high dividend paying stocks at a cheap price on that time. Dividend is a reward for investors, generated from a company’s net income. Remember, if a company’s share price decrease, you will still get the dividend if the company’s revenue is strong. Dividend can be a great additional source of income for investors.
- You know that share market recessions have been followed by a strong recovery. So invest your money and wait for the turn.
- Another smart way to increase your profit is to short the underperforming stocks. Short-selling is a risky affair during normal market period but it can be extremely profitable during the market correction. Experienced investors go for short selling to make up their losses or to increase their profits.
Conclusion
To know more details about the tricks and tips on the investment opportunities during the market correction, you may enroll your name in stock market technical analysis courses. Our share market course fees in Kolkata is moderate and give you the best value for money experience. However, the truth is even also an experienced investor cannot identify the exact top and bottom of a market. So, all we can do is guessing the signal of the market. When you see everyone is selling and the market indices are down by 10% to 15%, invest your money on some good fundamental stocks without any fear. That’s how you can use the opportunity of making money during the market crash. Plant your seed in recession and enjoy the fruit near in future.
