“Be fearful when others are greedy and greedy when others are fearful.”
A falling knife is risky to catch as it may hurt, but the one who catches the falling knife perfectly without getting hurt is called a genius. Investing at the time of crisis is too risky but one who invests in a fundamentally sound company at the time of crisis can generate good wealth.
At the time of the COVID-19 pandemic outbreak when investors and traders were selling the stocks in bulk, it did create an opportunity for the new investors to build their portfolio. Globally, when stock markets were getting crashed, individuals were selling in bulks which did create a history for the fastest decline in history.
There has been a “V” shaped recovery across the board from the COVID-19 economic crisis on the back of the strong recovery in the economy. We have seen large swings in the market in this period of 9 months where the market was crashed recovered and broke out its all-time high.
The stock market is speculative and always has a forward approach. In March, until when the lockdown was initiated market was getting crashed and made its low on 24th March it’s the same day when the lockdown was announced.
Having its forward outlook it NIFTY50 touched its new all-time high breaking the previous high of 12430.50 on 9th November. We saw a massive rally of approximately 5000 points in just 9 months which was the fastest recovery in the history including its high and low.
In this period of 9 months, fundamentally sound stocks have multiplied themselves and generated huge wealth for the investors. Below is the list of top 10 stocks from NIFTY200 which have generated ample wealth for the investors considering and individual have bought the shares around the close price of 24th March.
Source: Swastika Research
As we can see in the above graph, Adani Green Energy has rejoiced the wealth of investors by 700% which is the most NIFTY200 list of companies; the list is followed by two more companies from the Adani Group namely Adani Gas and Adani Enterprises.
In the period of lockdown when everything came to a halt, we saw many new traders and investors entered the market and earned handsome money by investing in some of the good quality companies. The valuations were cheaper and they got an opportunity to be a long term investor.
At the time of crisis stocks were falling and buying at that price does need courage which is equivalent to catch a falling knife but the market has again proved that investing in a fundamentally sound company will always reward investors.
When we buy goods, lower prices are generally a good thing. That’s not the same case in terms of stocks as we never know how much a stock can fall. However, if you would have bought the dip in quality stocks then it will surely benefit the investors. While if an individual wants to invest for a long term then a crisis is the best time to buy because as soon as the economy will recovering it will benefit the investor.
Historically, there has been an economic crisis timely in the stock market. It can occur in the form of a pandemic, recession, or any bubble. People generally sell their portfolio when any crisis happens but as said earlier it does create an opportunity for the investors to average out their portfolio also it creates an opportunity for new investors to build their portfolio.
There have been twelve crises in the 20th century excluding the geopolitical event and the still market had hit an all-time high on 04th December 2020. Thus, a new investor should look for a dip or any crisis event to build a portfolio and invest in the long term.