There are many ways to make money from the stock market, let’s talk primarily about two sections though. Since stocks are subject to recurrent and wide fluctuations in their prices, any individual looking to gain from these swings can do so in two ways. One, by timing the price. What that entails is the ability to anticipate the action/movement of the stock market in the near future. In this sense he is acting as a speculator. The other way is by way of timing the performance, meaning the ability to buy stocks below their fair value and sell them once they go above their determined fair value. Let’s call this section to be an investor.
A speculator’s claim to fame relies very heavily on the ability to forecast the market. While there are numerous people in this field who have done well by being good stock market analysts, the concept of being able to predict accurately and often, the movement of the market in very short periods of time just defies logic. We say short periods of time because to a speculator, the idea of waiting a couple of quarters or more for the stock to appreciate just seems outrageous. An investor though is quite content to do this.
“I don’t think I can make money by predicting what’s going to go on next week or next month. I do think I can make money by predicting what will go on in the next 10 years” – Warren Buffett, CNBC, 24/02/2020
You might think an average investor cannot deal successfully with determining the fair prices of stocks, purely due to lack of enough fundamental experience. It is in this case that people have looked at the “Buy Low – Sell High” approach. A classic definition of a shrewd investor is one that buys in a bear market when everyone is selling and sells out in a bull market when everyone is buying. The variations in the market though complicate the process of deciding what constitutes a Low and a High.
Let us check the view of experts in the world about their views:
“Buffett always says that you should be fearful when others are greedy and be greedy when others are fearful” – Jim Cramer, CNBC, 03/2020
It is at this time that great opportunities arise. Investment decisions need to be made and executed well without focus on the short-term direction of the market. If the world’s top investors do not believe that they can predict the markets direction in the short term, it augurs well for investors to invest in fundamentally strong companies that have showed resilience and growth historically and during these turbulent times.
We, at Vivekam invest only in fundamentally strong stocks that have the greatest scope for appreciation. For reference, the charts above show how Vivekam has performed in the 2 years succeeding major crashes in the market akin to the situation at hand now. We have observed an average outperformance of 27% for Lumpsum investments and 33% for SIP Investments.
Write to us at firstname.lastname@example.org with a free consultation of your financial planning or visit www.vivekam.co.in to get started with the various products (Lump Sum – Equity, SIP – Equity, Derivative and Mutual Funds) at our disposal.