Will Stock Market rally continue well beyond 2020, or Is Market likely to Crash in 2021? Lets discuss all this and more, lets dive in.
Stock Market can Crash if
- Unemployment – Number further rises
- Lockdown – More restrictions are put in place in people movement during Covid
- Disconnected Economy – If the Economy continue to remain disconnected from Stock Market due to several factors like current Monetary policy.
- Lower Profits – If Company realizes the profit are not back up even after opening up the stores.
- Geo Politics – Geo Political factors like Indo-China or US-China tensions further aggravates it may push up the VIX (volatility Index) and bring down the stock market.
Stock Market can Rise if
- Stimulus continues – This one applies especially to US Stock Market, if Congress decides and agrees on stimulus paycheck you will probably see the new all time high continues…
- Vaccine knocks your door – This one goes for Global toss, Vaccine launch will lead Economic recovery and all uncertainties will fade away leading the Market to continue to rise.
- Bad Priced In – Stock Market looks ahead of its time, and one theory is the bad is already priced in so Stock Market will continue to rise in the near foreseeable future.
- Govt. Intervenes – If Govt. continues to intervene and keeps the interest low, leading to Inflation and the stock Market rise.
- Recovery Stocks – If some sectors continue to perform well like the IT and Health care, it may overall skew the Market to achieve the all time high.
Data suggests Stock Market Crash or corrects double digit every 6.9 years.
So, What to do if it Crashes?
- Don’t Panic Sell
- Keep yourself diversified
- Keep some emergency cash
Now, if you are Indian, thinking on Where/How to start Investing than you may like to read the articles suggested below, and will need a Demat account to start Investing, you can open one by clicking here (Disclaimer – do your own due diligence before Investing)
Read more to know more-
Thanks for reading, Happy Weekend, Happy Investing!
Hello Riters, its been a long time out there, getting ready for Winter in Northern Hemisphere?
Today lets discuss why Invest in Index ETF and why avoid Mutual fund, lets dive in.
- In long Market always rise, thats not me saying, the likes of legendary investor Warren Buffet himself believe so. So, lets say if market always rise what is the best way to be on winning side?, of course buy into overall market low cost index fund like VTI
- On average 90% of actively managed mutual funds have underperformed benchmark indexes over a preceding 15 years period.
- If your Mutual fund have 2% of fees (expense ratio, portfolio fees, handling charges and other hidden fees), than that can eat 61% of your portfolio growth in long run. Shocked? No?, let me explain, suppose you have invested $10,000 and kept it for 50 years in Stock market just assuming a return of 7% (ideally returns are above 9%), your portfolio will grow to a lump sum of $294,600 by end of 50 years, now if it was a Mutual Fund with charges of 2%, then you only avail benefit of 5% CAGR, leaving your portfolio to grow to $114,700 (61% lesser or 39% of $294,600 market returns) read more here.
- Still not convinced? Lets say recession hits you in that case your portfolio will likely decrease in value but at the same time you will be charged the fees (the so called Active fund managers will still win this game).
- Expense ratio of Index fund is very low and there is no hidden charges, for example – VTI has an expense ratio of around 0.03% and If you are in India checkout ICICINIFTY with expense ratio of just 0.05% (let me know if you find something better in comments below, the likes of VTI is missing in Indian market)
Don’t take my words for it, always do your due diligence before investing. If you want to read more grab your copy of ‘Common Sense Investing’ the book by the founder of Vanguard Group.
Bonus Content – what to do in current stock market scenario? (for retail investors)
- Stay Invested, don’t sell value stocks so as to be able to avail the benefit of further highs
- Sell the stocks that lacks value & strong fundamentals and are up just in the Bull due to investor sentiment.
- Don’t invest a lump sum new investment amount, as the market is still prone to volatility due to Covid.
- Remember you have to buy in dips, sell in highs.
To read more on mistakes to avoid in Stock market check this. And if you are worried if Stock Market can crash in 2021 read this, click here.
Don’t let them take your hard earned money, get control of your money now! Be Financially aware, be financial literate.
Have a great weekend, happy investing! Happy Holidays… Stay Invested, stay safe, stay positive.