When the market is at its highest, one waits for the bottom and now when the market seems to have reached its bottom, we are still waiting to enter, fearing a dramatic decline further. What should a retail investor do in such a situation - enter or stick to the wait and watch mantra?
This kind of situation always persists. We keep on waiting for the market to touch its lowest and when it actually happens, we get scared in the sense that the markets may fall more. The reason for this fear is the nature of the stock market; it climbs through the stairs to touch its peak but when it falls, it falls from the lift. Such dramatic declines always scare us. We never know when the market has reached the bottom. Even in the current scenario, there are still many reasons that may lead to another market fall. There are different possibilities that this situation may create. In the current crisis, the sales of many companies have hit the rock bottom and this may wipe out their entire profits or some companies may turn out stronger, as small competitors might vanish or for some, this may lead to the reconfiguration of their business models.
All in all, it's of major concern. It is better for investors like you and me, who wait for the bottom and at the same time might get scared of such situations, to aim to methodically and regularly invest our money in a defined time frame. Say you have Rs 5 lakh, waiting for the market bottom may not be a good idea. Instead spread it over maybe 10 months or so. If you are someone who doesn't get overly bothered by drastic declines, then you may spread your money over six months and if you are someone who doesn't at all get perturbed by the market fall, I would still recommend that spread across at least two-three months over a weekly basis.
It is important to invest methodically and spread your money because the impact of drastic market declines tends to stick to your mind, with the decline of last few days being an example. Therefore, devise a plan, understand your psychology and start investing. If you keep on waiting for the markets to touch it's lowest, then you may never be able to invest.