SHOULD WE INVEST IN EVERY MARKET DIP

Should You Invest In Every Market Dip? 

That it is not necessary that you invest on every dip/fall of market. Infact only after a threshold of how much market has fallen does investing in dip make sense.

The Rate of Return on the money you invested in market dip/fall must be more than your Internal Rate of Return(IRR).

 

For Example: 

Assume You Invest Monthly ₹5000 in Stocks Which Give An Average Return of 10% 

During the Market Dip, You Invest Extra ₹5000 . 

The Investment You Made During the Market Fall Should Fetch More Than Your Average Return ie 10% . Only Then The Investment Made During the Market Dip Is Beneficial! 

Basically knowing the reason behind the fall of market and determining the perfect stocks or companies in which your are going to invest make an impact on the investment made and as well  as on the portfolio.

Crashes In Global Indices

Markets globally saw a Downturn on Monday, August 5,2024 . However, some signs of recovery on Tuesday, August 6, 2024

Key indices in the US—the Nasdaq, the S&P 500, and the Dow Jones and major European markets, including the UK's FTSE, France's CAC 40, and Germany's DAX suffered massive losses on August 5 on mounting fears that the US was staring at a recession

Nasdaq, S&P 500 and Dow Jones fell 3 per cent, while FTSE, DAX and CAC 40 dropped up to 2 per cent. 

However, Asian markets saw a recovery on Tuesday, August 6. Japan's Nikkei, which suffered a massive loss of 14 per cent, witnessing its worst one-day loss since "Black Monday" of 1987, in the previous session, jumped 9 per cent on August 6.

Indian stock market benchmarks—the Sensex and the Nifty 50—closed 3 per cent lower on Monday. On the other hand, the mid-and small-cap indices fell up to 4 per cent. Sharp losses in the Indian stock market wiped out nearly ₹15 lakh crore of Investors in a single session.

Recent Market Crashes in India 

Crash Of 1992

On 28 April 1992, the BSE experienced a fall of 12.77% - due to the Harshad Mehta Scam. 

Crash Of 2008-2009

On September 15, 2008, the bankruptcy of Lehman Brothers and the collapse of Merrill Lynch along with a liquidity crisis of American International Group, all primarily due to exposure to packaged subprime loans and credit default swaps issued to insure these loans and their issuers, rapidly devolved into a global crisis. This resulted in several bank failures in Europe and sharp reductions in the value of stocks and commodities worldwide.

During the 2008 global financial crisis, the BSE Sensex experienced a sharp decline. It dropped from over 21,000 points in January 2008 to below 8,000 points in October 2008.

Crash Of 2016

On 9 November 2016, crashed by 1689 points, believed by analysts to be due to the crackdown on black money by the Indian government, resulting in frantic selling. The Sensex nosedived by 6% to 26,902 and the Nifty dropped by 541 points to 8002. These were said to be due to the demonetization drive by the Modi government.

Crash Of 2020

The recent outbreak of COVID-19 that resulted in a pandemic and lockdowns around the world led to a huge market crash in global and Indian markets.

From the day the World Health Organization (WHO) declared the virus as a pandemic, the Sensex dropped from 42,273 points to 28,288 points within a week. This coincided with the Yes Bank crisis causing the strong BFSI sector to lose crucial points too.

Summing Up: 

As you can see, stock markets have experienced frequent crashes for a wide range of reasons. From wars to broker cartels, political instability to banking crises, government policy decisions, and health concerns, stock markets are impacted by a wide range of factors.

Hence, it is important to remember that keeping an eye open for such events can help you determine the direction the markets can take. Also, we would like to highlight here that while crashes are inherent to stock markets, recoveries have also been consistent. Hence, a long-term stock investment strategy can help you survive such periods with ease.