THE last three to four years have proved to be a roller coaster ride for the stock market.
For the past 10 months, we have witnessed some pretty sharp falls. And the fact that it doesn’t seem to be bottoming out, is making investors a lot more nervous. Of course, volatility is not something new. But the sharp ups and downs are scaring even the old-timers who are in this business.
What next? First, cut out all the noise and clutter around you and get back to basics. This is because 90 per cent of the people around you are as clueless as you are. So, when you let the facts speak for themselves, you have a better chance of eliminating ambiguities. Let's find out what these are.
Fact 1: The equity market is NOT a lottery ticket. Every share has a fundamental value and is based on the company’s performance.
Fact 2: It is possible for share prices to be widely different from their intrinsic value.
Fact 3: In the long run, share prices always move towards their true value depending on the profitability and growth potential of the company.
Fact 4: Irrespective of whether the United States goes into recession or the sub-prime problem generates more losses, India’s economic growth rate will still be comparatively high.
Fact 5: Unless we have some serious calamity, a political crisis or poor monetary or fiscal policy, we may continue to see over 7 to 7.5 per cent growth rates over the next 5 to10 years.
Fact 6: If the economy continues to grow at such a healthy rate, it has to reflect in the corporate performance as well. This will lead to appreciation of the share price sooner or later.
Keeping these facts in mind, the long-term outlook for Share Market India still remains quite positive.
Quick lessons!
1. Do not panic.
2. If you have invested in good companies and mutual funds, stick to these choices.
3. It's a good time to invest in the Share Market.
4. Be patient and disciplined. You will be rewarded!
If Buffet can win, you can, too!
Meaning of the bull and bear market
The bear and the bull are two animals used to describe market sentiments from decades. The fighting styles of the bear and the bull are used to explain the bear and the bull market conditions. The bull fights his prey with his horns by an upward movement and this signifies an upward movement of stocks in the stock market. The bear is known to tear down his prey with a downward movement and so you can see that the term bear run is used when the market is heading down or declining.
Bulls are described to be headstrong and fearless and so this best describes the upward trends in the bull market. The bear is slow and they are known to be hibernators and hence it aptly describes the sluggish and downward stock market. A bear investor is generically pessimistic whereas the bull investor is generally very optimistic.
