May 11, 2022
We have already talked about how the year 2022 has been a rather choppy year for the stock market & the reasons behind it. We have also mentioned that we expect a similar kind of volatility to continue for the next couple of months. That being said, we stumble upon the next important question - What can you as investors, especially long term investors, do now?
We need to look at volatility with a positive outlook. It is in fact a necessary evil & market corrections are not only normal but also to be expected. They tend to last anywhere from a few weeks to a few months and we are very much in that zone at the moment. We at StockAxis have always advised against timing the market. We truly believe that investing is all about ‘time in the market’ as opposed to ‘timing the market’.
If your cash is sitting idle and is meant to serve a long term future goal that is 10+ years from now, then we would say that now would be the right time for you to start buying quality stocks that are available at just the right valuations due to all the selling pressure. The stock market has retreated from highs and in our view, the growth outlook is stronger than many appreciate. We are seeing the corporation’s growing earnings at a better-than-expected clip. Hence, we are confident that it is a good time to own stocks.
We see many long term investors that think they should wait for things to settle down a bit before they can invest. However, there is a fundamental flaw in this approach & that is the stock market does not wait for good news to rally. In fact, the opposite is often true. The market is a leading indicator of the economy & starts performing when the “wall of worry” grows. We witnessed this phenomenon recently during the Covid pandemic & the lockdown. We see newspapers headlined that the stock market is ‘disconnected from the economy,’ but that characterization tends to miss an important point. The stock market is not necessarily a reflection of the current economic climate and sentiment. It is a reflection of how the economy and corporations will look 6 to 12 months from now.
Now that we are witnessing high inflation, fluctuating crude prices, escalations in the war in Ukraine, the RBI raising the interest rate by 40 basis points etc, it is important to remember that the stock market has already priced in all of these factors. If something is already widely known & discussed in the news, then it does not have much pricing power in the stock market. It's old news already! Wise Investors are always future-oriented & focus on the coming months as opposed to the past.
Finally, as we always say, investors need to use volatility to their advantage. Such periods of corrections seem to be the ideal time to review your portfolio and asset allocation and to ensure that your investments are aligned with your long-term objectives. Once your portfolio is in line with your goals, then all you have to do is remember that short-term fluctuations in the market should not change your long-term strategy.
If you are looking out to curate a portfolio that is best prepared for the coming times or want to restructure & realign your existing portfolio to suit your financial goals, then we recommend StockAxis Emerging Market Leaders for you.
With StockAxis equity research, you have access to world-class research that goes beyond the quantitative aspects & penetrates into the qualitative aspects so that you can invest and book massive returns over time from India’s Emerging Market Leaders. You shall be fully empowered to make informed investment decisions. After all, it is rightly said that knowledge is power. We at StockAxis truly aspire to lead you through the current market dynamics by helping you curate a portfolio that can help you achieve your financial objectives without any turbulence.