Is it time to invest in the stock market

Raj Khosla

Cruel Stock market crash Take everyone by surprise. Within 20 days starting on February 24, the Sensex index has fallen by nearly 15,000 points, a 36% drop. Small investors, especially new entrants, started a four-digit mutual fund SIP (or systematic investment plan) about two years ago because "
Mutual Fund Shahihai", Shocked. Last , when the stock rose and the benchmark index reached an all-time high, these new converters saw extraordinary returns on their SIP.

However, they have taken root in the past 20 trading days. With their portfolios losing money, these first-generation stock investors questioned their decision to enter the stock market. In many cases, this decision puts money into stock It was taken by overthrowing the financial knowledge provided by older relatives. One can imagine the fierce debate and fierce debate they must go through before handing the money to Mr. Market.

For such first-time investors, the current chaos is a double blow. Not only did they lose money, they even lost confidence in the market. Novice investors rarely understand the risks associated with the stock market, and losing 30% to 35% of their principal may disrupt transactions, especially in the event of a sudden occurrence. Even if their investment portfolio eventually gets worse, many of these people may stay away stock forever and always. Not only that, they can even advise others in the social circle and family to stay away from the stock market.

This is bad news, not only for asset management and wealth managers, but also for the entire economy. Even before Coronavirus diseaseThe economy is facing a structural slowdown. Passenger car from April to February 2, 2019-20 can reduce consumer confidence, which is a decrease of nearly 15% compared to the same period last year. When the figures for March appear, the figures for the whole year could be even worse. Demand in other sectors has also declined.

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Demand may now fall. In an ideal world, stock markets look to the economy. If the economy is booming, the company will do well and the stock market will do well. But in the real world, the tail also shakes the dog. When the stock market is performing well, consumer confidence is higher. If individuals feel rich, they are more likely to invest and invest, which will boost consumption and benefit the economy.

Over the past month, this investor's confidence has deteriorated severely, and spending may be reduced as troubled investors try to make up for losses. Shopping plans for families may be completely delayed or put on hold. Luxury purchases and disposable spending are impossible. The stock market has fallen, but may fall freely from here.

The government has set up a task force to alleviate the economic difficulties caused by the pandemic. This is a positive move that could ease tensions in the economy. But urgent steps are needed to boost investor confidence, otherwise the Covid-19 tsunami could make our worst nightmare a reality.

(The author is a managing director of MyMoneyMantra.)

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