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!
Lets look at a list of Investment available to you globally.
- Direct Equity (Stocks / Shares) – High risk Investment with greater return in long run and volatility in short, Equity today is one of the easiest to invest in terms of accessibility with just a few clicks you can own a piece of Tech giants like Amazon, Apple etc. (not suggesting/recommending). A good thing for a beginner to Invest when starting with Equity is to invest in broader market indices like Nifty, Sensex (in India) and VTI, S&P 500 in US. By Investing in S&P 500 you can own a piece of 500 of the significant publicly traded companies in US. (Link to Open a Demat account with Zerodha to start Investing today)
- Mutual Funds – A mutual fund is made up of a pool of money collected from many investors to invest in securities like stocks, bonds, money market instruments, and other assets. Mutual funds are operated by professional money managers, who allocate the fund’s assets and attempt to produce capital gains or income for the fund’s investors. But be aware of the Expense ratio and hidden fees, they can eat a big chunk of your portfolio in long run.
- Real Estate – Own a house and rent it, while you wait for the upside. Real Estate is the physical asset that you can own and feel unlike the Stocks. But you need to research before investing, and you may need to learn something called house hacking to start with, where in you own a Duplex and rent one portion while you continue to live in other. And if you like Stock Market and hate the extra work to put in for the physical asset you may be better of owning the REIT (real estate investment trust), a company that owns, operates, or finances income-generating real estate. Modeled like mutual funds, REITs pool the capital of numerous investors.
- Commodities – A commodity is a basic good used in commerce that is interchangeable with other goods of the same type. For investors, commodities can be an important way to diversify their portfolio beyond traditional securities. Because the prices of commodities tend to move opposite to stocks, some investors rely on commodities during periods of market volatility. Commodities that are traded are typically sorted into four broad categories: metal, energy, livestock, and agricultural. When it comes to Commodity it is good to own a small portion of your portfolio in precious Yellow Metal – Gold to hedge against the paper money.
- Bonds – Bond is a debt security, borrower issue bonds to raise money from investors willing to lend for a particular period of time. Bond is a fixed Income Investments. There are wide variety of Bonds such as Agencies, Treasuries, Corporate, Municipal etc. A T-Bond, Treasury Bonds issue by U.S. Federal Government is considered to be safest of all, regarded as risk-free since they are backed by the U.S. government’s ability to tax its citizens. One good Investment in India is SGB (Souvenir Gold Bonds) issued by GOI (Govt. of India), and it can be bought via Zerodha (Link to Open a Demat account with Zerodha to start Investing today)
Whatever you Invest in remember to diversify well, and also remember no matter what there will be a time where your investments may lose 50-70% of its value. The key to avoid huge downside especially with volatile investment like Stocks is Asset Allocation. Diversify not just across different investments but also within one investment.
Further to the list above, below are some great articles published by us to refer before Investment-
# 7 Ways to lose money in stocks
# Caution! Dalal Street Ahead
# Invest your Money
Also, a great Book that I can recommend anytime to dive deep into Investments for an ordinary man and achieve financial freedom is MONEY Master the Game.
Thank you for reading. Have a great weekend. Let us know in comments below, what is your favorite go to Investment.