Investing in a bearish market.
October 14th, 2008 Ikechukwu Emelike || ikechukwu@stockmarketnigeria.com
The bears have come and has refused to go, it has however left a lasting impression on the minds of investors. The Nigerian Stock market some months ago was the toast of investors but today the bears have detered investors confidence in it. Investors have watched their investments dwindle over a short period of time with different investors with his / her own ordeal.
When will it end is the question every investor seems to be asking. By definition, a bear market is when the stock market falls for a prolonged period of time. It is a market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment to be self-sustaining. As investors anticipate losses in a bear market, selling continues, which then creates further pessimism.
Experiences such as these are generally what scare would-be investors away from investing. Ironically, this keeps the bear market alive because no few buyers are purchasing investments, the selling continues. A bear market will cause the securities you already own to drop in price but would keep you at a loss if you plan on selling or you need your money immediately. Falling stock prices and depressed markets are the friend of the long-term, value investors.
If you invest with the intent to hold your investments for decades, a bear market is a great oppurtunity to buy as prices of stocks are undervalued. To invest in a bearish market, research for companies that are stable and that are going to be around for several years into the future. A stable company is one that provides goods and services that are always going to be needed. Note that even the best selling stock can dip for a while, but over the long term will become stable and rise again.
Another way is to diversify your porfolio, buy into stocks, bonds, debentures, annuities, cash e.t.c so that when stock prices slide, the cash or hard currency part of a portfolio will remain stable. It is also important to buy into dividend paying stocks as they act as bear protectors. When the dividends are reinvested, they purchase more shares at lower prices during a bear market.
(No Ratings Yet)
Loading ...
The bearish nature of the market is really scary especially to d short term investors, the question now is for how long will this bear tomment the market b4 d bulls come to our rescue or are we waiting till infinity? Should we keep investing, waiting till God knows wen ?
Bear market is part of the game. What is happening in the Nigerian stock market is not only a normal stuation, but a great opportunity for long term investors. Patience is the essential quality required from those investors who want to get excelent profit.
investing in the bearish market is not enof.u must be sure that u r investing in the right stock(s). Warren Buffet is right now, buying stocks madly in the U.S. market.that a lifeline,if anybody needs 1.
What Nigerian stockmarket is facing is a ’sharp’ and ‘consistent’correction of price/s. The values dipped 60% and there is nothing bear about it. 20%…is still too much but we can still talk about a bear. What Nigerian should understand is that the economy is over-valued and I think Volume is responsible for it. Commodity prices are so much, that accurate measure of businesses are not certain.
Abuja and lagos is serious default on price…market data, we can compare market movement in self sustaining ‘demand and supply’ like Aba and Onisha, which are not state capitals and are medium to medium. Things are so expensive that anyone looking to make profit in the Nse should be looking at prizes equal or at least passing what is avialable which will be hard.Employment numbers are not certain and this killer bank attitude is not helping-they just push prices upwards.
We can look at spread sheets, which helps company position itself for the future,for instance, what is the prospect for the future for would be borrowers.
The man ‘Dollars’ talked about Warren Buffet buying what he can…yes he is second rishest man in the world. He own 9% of defunct Wachovia and Wachovia sank, thanks to his high derivitive profit placed in Euro…I mean years before Euro. When Euro came he was simply twice as rich. He can get the credit for his recent acquisition which is the bear root of most successful markets and comebacks. America runs on Credit; hence securities and if banks are not lending…there is nothing BEAR about any such market.
This problem is a market problem and commodity prices in Nigeria can determine participation from the geneal public. If the prizes on the ‘narrow’ are too much, there is nothing credit institutions like banks can do. They are just sitting on thier money…and value naturally returns to its market level. The problem is that credit is already acrued and people are seeking to bail. The shifting ground of option and insurance might even be part of the problem facing Nse and I think insurance companies has something to do with inter bank competition.
Insurance could have been part of the solution with AIG in Nigeria doing well, yes AIG. But the real time attention of wold marktet is displaced to Euro. Thereby forcing a collision catharsis of the two major economies, and countries like Nigeria are mere part of that Reimann INTEGRABLE. Look at FTSE 100 and FTSE 300…very identical movement.
My solution remains the same, block foreign companies from sending money to Nigeria via dollars and Euro and to capitulate in Euro and dollars in NIgeria or any other currency. When this happens, Nigeria Naira will still be working for the rest of them and not for its citizens. We can’t really expect Nigerian to invest in that local market if the movement of the Niara is not known. I mean Nigeria is a lot stronger than it shows.
2, try strategic 36 separate state investment by way of Federal Government.
3, lower interest and its availability, slash import tariff by up to 50%. This will be money that will improve our buying power within our demand and supply…and watch how prices will drop. Until government backed monetary policy is done, this whose bear matter is side drum. No offence.
Hi all,
How far do you think the global stock market crash will affect sp of companies in nigeria?
This may be a great opportunity for long term investors only if you know/sport the Big players of tomorrow today. Can you recommend 3 of such companies.
Regards,
Olu
well i dont know of any investor who is not scared at the moment.untill intersest rates come down asper bank lending rates it will be suicide to take risk.if it is risky it will surely fail.investing is like jumping infront of a moving train,warren is spending other peoples money i heared him say he is sure the govt will bail out which they did but what is urs doing,no warren in nija
l think investment in this time is good only for the long term investors for good profit.opportunity is in the market for small long term investor to enter with their money.