“Buy when there’s blood in the streets, even if the blood is your own.” The equity market is bleeding these days. The US Stock market index, NASDAQ, has crashed by -23.29% in 2022 YTD. Whereas, the Indian stock market has also seen a similar crashing of stocks with Sensex declining -4,856.85 points i.e. -8.21% in the same time period. Every day, the market witnesses stocks plunging and a sharp decline in the indexes.
With the market going down, an obvious question among the investors is whether they should invest more or wait for the market to bottom out (or trend reversal). Well, the answer is that the bear market is the best time to keep investing in stocks. Even better if you’re saved so far and planning to put your money in the market now!
Stocks trade at Discount in Bear Market
In the bull market, most stocks are overvalued. However, during the bear phase, stocks trade at discount compared to their true value, which offers bargaining opportunities for the investors. Several of the high-quality stocks are currently trading at lower prices in the recent market downturn of 2022.
Multiple Opportunities to Invest
Very few stocks and sectors trade at a lower valuation during a bull market and are hence lesser lucrative options available for investment. However, during the bear phase, most sectors are affected, giving investors opportunities to choose but would not have been otherwise possible during the bull run.
If you look into the sectorial indexes in 2022, many sectors have fallen significantly compared to the benchmark index. Sectors like IT, MNC, Realty, and Services which generally are overvalued, have been in the downtrend so far in 2022. And hence, multiple opportunities.
Don’t stop your SIPs
SIPs are instruments to average the buying price during the bull and bear phase. If you invest in SIPs only during the bull phase, you would have bought the funds only at high prices. However, SIPs during the bear phase give an option for the investors to decrease their purchase price by averaging at a lower entry price.
In short, continuing your investments during the bear phase may look dreadful, mostly because you are not certain to get returns in the short run. However, buying at a discounted price during the bear phase is always profitable in the long run when the trend changes and equities realize their true potential.
