1. Keep your confidence: In the first place, it was your confidence that the stock market will make money for you if you invest correctly that attracted you. Therefore, do not underestimate the importance of keeping a strong mind during a downtrend such as this.
I used to be discouraged, thinking that there would never be an uptrend again. Now, I am highly encouraged, because I know with 100% certainty that we would end this downturn with a brand new uptrend someday. The key here is to keep your mind at rest so as take advantage at the dawn of a healthier market condition.
2. Have a watch list: A watch-list in equity investment must contain stocks you plan to buy for one reason or another. The attraction could be the price, earnings performance, volume traded or the intrinsic value. When the market starts a new uptrend, it is important to be ready to jump in on the strongest stocks out there and make money. Many stocks are undervalued in the Nigerian stock market now. So, select the ones that should be on your watch list.
3. Keep a few positions: During a down-market, keep a few stocks in your portfolio for effective monitoring and revaluation. If you are used to buying 20 to 30 stocks, there is nothing wrong with buying just two or five. One reason is that it allows you to scale into some stocks you might like for a longer-term. Another reason is that smaller positions help you to deal with higher volatility and protect your capital. That way, you do not get stopped out of everything and bleed to death with the wide market fluctuation.
4. Hold cash: Cash is king at all times and in a bear market, it is better to hold cash, not stocks, because three out of four stocks move with the general direction of the market. When the market is going down, even the strongest companies with good fundamentals can get hit. For example, during the 2008-2009 financial crises, Nigerian Breweries’ price dropped from N120 to N23, not because the company’s products stopped selling, but the mood of the market and the trend which affected its share price. This same company recovered and surpassed its peak, touching N193 in 2017.
Avoid holding stocks, so you would not lose your hard-earned money with the market. There is nothing wrong with keeping some cash on the sidelines for healthier conditions. You don’t have to invest all your capital in the market at all times.
Again, the current undervalued state of the market offers opportunities to position for the short to long-term, which is why investors should target fundamentally sound and dividend-paying stocks for possible capital appreciation. This was noted in the 10 golden stocks and trading ideas for 2020, as discussed extensively during the Investdata 2020 Opportunities & Trade Ideas Summit.
Meanwhile, the home study packs of Invest 2020 Opportunities and Trade Ideas Summit containing the 10 Golden Stocks for 2020 are available with an average return of 13.37% in less than 30 days. To obtain your pack send ‘Yes’ or ‘Stock’ to 08028164085, 08032055467, 08111811223 now.
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