The term Bear Market is not easy to define. A loose consensus is when the market falls 20%, it is officially called a bear market. Let us say the market has fallen from 21000 to 17000, then it is a bear market. However, just hold on, life is not so simple!
Too many pundits and journalists jump to declare ‘The market is now in a bear phase’. My left foot. None of us know whether the market is in a bear phase or in a bull phase. The day I finish saying the market is in a bear phase, it can go up 5% and make my prediction look stupid. Even if it was a bear market which pundit knows whether it will remain there or will it go up?
The whole market argument (or rather pundits argument) about bear market and bull market is completely futile and absolutely useless. Markets always have good shares to buy and bad shares to sell. Check your portfolio – see what is worth selling off even today because the management is not good or the products are not selling. Shares like Gillette, ITC, P&G and Colgate also loose sheen when the markets are doing badly. However these companies are NEVER available at a price earning multiple of 10 – if that is what a bear market is supposed to mean. Does it really matter that the index is at 18000, 17500 or 15500 – but the shares that YOU want to buy are still quoting at a price earning ratio of 28 – albeit lower than 31? If you were a buyer at 31, you can buy more at 28!
Strategy for bear markets:
Let us assume that we are in a bear market. Should you rejoice or feel sad? Well depends on whether you are in an investing mode or you are in a withdrawing mode! Most people I know (from age 23 to age 84!) are still in investing mode..so a bear market (or a market are depressed at the current stage) is a blessing. I have no clue which share is a good buy and which is a good sell ..but if you are in such a doubt pick up an ETF of the sensex or the nifty.
Pick a real low cost etf (if you are aggressive pick the Sensex etf and if you are not so aggressive pick a Nifty etf). If you are already an investor in a mutual fund, just pump in some money into the funds that you are already investing in.
A SIP is a good idea, but so is picking up some stocks which you understand…However I do not think markets are at mouthwatering levels for many shares, so please be careful…Remember roses are surrounded by thorns!
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