There are those quintessential “happy” days the stock market sees, sometimes – stable Dollar, positive economic indicators, bullish stocks stay on course, previously bearish stocks don’t fall as much. This, certainly, doesn’t happen often but every now and then there are such days – the worst of days to start investing! “You have to buy when others are panicking,” said Jim Cramer of Mad Money, recently.
When it all goes right, stock prices saturate faster, there are fewer undervalued stocks in the short/medium term and most trading peers feel that the market Is going to self-correct soon.
Theoretically, investing in a falling market seems like quite a risk but those of us who know how to manage to risk better, tend to come out with flying colors when markets come back to “normal”.
As far as risk itself is concerned, smaller (in terms of money invested, timing of investment etc.) risks usually end up hurting in the long run – especially when your chances are not 50-50. A bunch of small risks gone wrong one after the other make you lose more money than what you gain from intermittent successes. So as long as you have a method to deal with risks, you are better off investing in bad times.
Alongside timing, there’s diversification. When the times are great, some sectors and stock types etc. do particularly well while the rest of the market does just about “ok”. So many invest in whatever appears moving upwards, faster. They lose the opportunity to adequately diversify their portfolios in these times. A bear market, when everyone is freaking out, is a better time to build variety!
So, did you check how many new stock investors joined the China market last couple of months?
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