Bear Market
Bear Market is part of the Stock Market game. In fact it is GOLD MINE of stock market!
How Bear Market is an Opportunity?
Bear Times leads to Price crash in the order of 30-80% on Average while the Company Fundamentals may not have crashed that much.
In this case the Margin of Safety on Intrinsic Value will be higher & you will be positioned for more profit in such a deal.
So you should be Buying more in Bear Times!
Now you will be thinking: Why all other people are fearful in bear market?
Why most people are fearful in bear times?
It is because they are short-term Or medium-term investors. They keep moderate stop losses. They buy the stocks without understanding the Fundamentals, Value etc.
So these guys will not buy during bear times & in fact they will sell on bear market there by causing more damages.
We should not follow these amateurs!
Behave like the Fund Managers!
As said before only 5% investors really make profit in stock market. This is because the reamining 95% are Exiters during bear times!
Here we should observe the Fund Managers – they are disciplined to understand Bear Market are opportunity & they buy more during the period.
How is that possible?
Yes, it is possible if you follow the Portfolio Theory of Value Investing.
BEAR MARKET IS THE GOLD MINE OF STOCK MARKET
PORTFOLIO THEORY
10-20 STOCKS IN PORTFOLIO
It is possible that in stock market a single stock can go down to Zero! But the Portfolio Theory says that NOT All stocks will go down to Zero!
So It is important for you to have at 10-20 stocks in your portfolio.
Futurecaps way is to have 3-5 multibaggers added every year. If you add 3 then in a 5 year period your portfolio will have 15 stocks. If you add 5 then it will be 25 in 5 years.
So be careful while adding too much stocks to your portfolio. The recommended range is 10-20!
MONTHLY SIP
The best way to buy stock in a Portfolio is to Buy every month through SIP option.
Adding monthly SIP ensures you have Averaged the price of a stock. You will be also having Funds to invest on during a bear market.
70:30 RATIO
All the big fund managers like Warren Buffet keeps a 70:30 ratio for Stocks:Bond holdings. So whenever the bear market opportunity comes they use the 30% fund in Bond holdings to invest in stock market.
What the History Says!
NIFTY PE RATIO STRATEGY
During a bear time NIFTY PE goes below 15. During this time the stock prices will crash 50-80% on average.
But later in 2 years the undervalued growth stocks have displayed multibagger returns when the market bound back.
Clearly, the risk is low during bear market investment!
RATIO OF BULL:BEAR MARKET
History have displayed that BULL Market is holding 85% of the time & Market is Bearish only around 15% time.
The one who Invest in Bear Times is positioned to gain higher when the Bull Market arrives.
INVERSE PYRAMID STRATEGY
This is one proprietary term of Futurecaps which you will not hear elsewhere. The Inverse Pyramid Strategy says that when the NIFTY PE RATIO is going down you have to DOUBLE the investments.
For example, when NIFTY PE RATIO was 25 you bought a stock for RS. 1 LAKH as the Intrinsic Value Discount was 30% with a projection of Multibagger Returns as 500%.
Now, the NIFTY PE RATIO is 15 and the stock has crashed 50% while the Fundamentals are Intact – hence the Intrinsic Value Discount is now 60% projecting the Multibagger Returns as 1000%. So you should DOUBLE the investment at RS. 2 LAKH now!
RISK IS LOW DURING BEAR TIME INVESTMENT
Our Bear Market Success!
2008
During 2008 bear market we entered Infosys at low price & gained 300% returns in 5 years.
Average 80% ROI while FD of 8%
2012
During 2012 bear market we entered Cera Sanitaryware at low prices & gained around 500% returns in 4 years.
Average 100% ROI while FD of 8%
2020
During 2020 bear market we entered Manappuram Finance at rs. 90 & gained 50% in 1 month.
Average 50% ROI while FD of 8%
GOLDEN RULES OF BEAR MARKET HANDLING
You are being warned that Not all stocks are good in a Bear Times. You should follow the below guidelines during bear market investing.
- Never do a Panic when the Market goes Bearish – Control your emotions as you put only extra money in stock market
- Keep aside Emergency Fund with 1 Year expense during a Bear Time – This will protect your Stock Investments from Liquidation
- SIP Buy stock in Bearish Market – Ensure they are low-debt, growth-oriented, intrinsic-value safe multibaggers
- Exit the high debt stocks of non-performing sectors during Bear Times – As chances are high that these may crash heavily & never recover due to debts screwed up
- Check the NIFTY PE Ratio for more Conviction Investing – Observe the green & dark-green times as best for investment
- Consult with our Adviser – To check your portfolio, strip off low-growth ones, position for next 5 year Financial Freedom through stock market