Thursday, April 30, 2015

When The Risk Goes Down

We have witnessed a sudden fall in the market over the last couple of week. It has gone down nonstop making an amendment to its bullish trajectory and worrying market enthusiasts. Some might have jumped to hit the exit   button while seeing some stocks correct as much as 30%.
If an investor has never seen a bear market, he might be deluded to believe he was a long term investor with thinking rooted in logic. Overnight he can pack his bags and leave the stock market.

Markets follow life, every high has a low and every boom will end in a bust. The vice versa is also true and as an investor we take advantage of the second scenario only, always. A stocks worth is not measured by its price but by the value of the business. When the price goes lower, the risk also goes down. What better situation can an investor have?

An investor is the one who owns a business for generations and not get worried of the price as the value of the business does not change that frequently. There were many businesses that are well run and recommended recently by many analysts, many of them have corrected by upto 30%. If you did believe in them, this is the time to act.

Let not the errors of omission make you poorer than the errors of action you have taken this far. When the risk reduces, take them as the odds are in your favor.  One would never know how far it can fall, but if you see value and you are willing to own the business like its owners, then lap it up. You will never go wrong by waiting it out.