In uncertain economic times when global or country economy seem to weaken, you would often cross paths with term recession and frequently hear it. To those who don’t understand its meaning, it could be intimidating for them while they look to invest in India. In simpler terms a recession is a duration of a temporary decline in the economy. During a recession, trade and industrial activity are reduced, and it is reflected by a fall in the nation’s GDP in two successive quarters or more.
But believe it or not, investing in a recession in India can be a smart financial move. Even those new to the world of investments, can start their investment journey in a recession. In this blog, we’ll explore the ins and outs of methods, ways, and tips to invest in a recession, in the Indian market.
Basics of Recession
So, before we dive into the depths of how to invest in a recession, let’s start with the fundamentals of recession. What exactly is a recession in India?
A recession a term used for describing a significant and stretched decline in economic activity of the nation. It is often characterized by a reduction in the Gross Domestic Product (GDP), rising unemployment, and decreased consumer spending in the country.
When this phenomenon is observed across the globe, it is termed as a global recession. These economic downturns could be a result of various factors, both internal and external. A recession negatively affects the overall health of the economy.
Investment Goals and Strategies while investing during a recession.
When you’re going to invest in a recession, the first step you must take is to set clear investment goals. You should have a clear understanding what you want to achieve with your investments done in this period. Your goals will always dictate your investment strategy. Be it accumulating wealth over the long term, saving for a specific financial goal, or as naïve as preserving your capital, your goal must always be defined.
Risk Tolerance and Risk Management
Indian markets could be volatile, moving a lot, especially during a global recession. So, before you make any investment decisions, it’s essential to assess your risktolerancefirst. Also, you must check if the decision you’re taking, aligns with the investment strategy that you have chosen.
To get an idea of investment strategies you could consider investing into learning from the best stock market courses in Delhi or even seek advice from a stock market institute near me.
In these crucial times, you must ask yourself, “How much risk am I comfortable taking?” A critical aspect of investing in a recession in India is risk management of both traders and investors. To mitigate such risks, you must consider diversifying your portfolio across different asset classes and stocks of different sectors.
What should be your asset Allocation during a Recession?
During a recession, markets often behave like a rollercoaster. For you to ride this rollercoaster, you must put a lot of emphasis on your asset allocation in the portfolio. Majority of this decision-making focuses on how much of your portfolio money should be parked in stocks, bonds, and other investments. With the help of diversification in your portfolio, you can spread out your risk and reduce your portfolio’s exposure to the recession-sensitive sectors.
Investment Options in India
Now, the time has come to delve into specific investment options available to Indian investors during a recession. Let’s start by considering these options one by one:
- Stock Market: Indian stock market provides investors with an excellent opportunity to invest in recessionary times. Not all the sectors in an economy would face a recession at a certain time. There are always a few exceptions to the short-term trend.
You can research and look to invest into blue-chip companies and even the best penny stocks having good financial sheets. You can also consider investing into mutual funds such as liquid, debt or gold mutual funds to spread risk of portfolio. If you’re thinking to invest in a recession, you can attend a stock market free webinar to get valuable insights and start with more confidence in your research.
- Fixed-Income Investments: In uncertain times of a recession, government and corporate bonds are considered a safer alternative to stock market during a recession. These bonds offer regular interest payment. If these bonds are selected and added to the portfolio after thorough research, they could provide stability to your portfolio in such periods.
- Precious Metals: Investing into precious metals such as gold and silver is a widely popular and traditional method. These instruments are always considered as a good hedge against economic downturns like recession. The value of these assets either appreciate or remain the same during the period of recessions.
- Real Estate: As we all know that real estate investments require a huge capital, REIT provide the solution to this capital problem. You can also consider investing into Real Estate Investment Trusts (REITs) during recession. It allows you to invest in real estate without the hassle of owning physical properties. This investment asset has the potential to provide steady rental income, even during a recession.
In this gloomy time, if you could find time to trade, it could be another opportunity to make money in disguise. To start with this opportunity, you would have to understand what trading strategies are about. You could start with the candlestick patterns, study basic candlestick charts, learn support resistance and keep an eye on market trends to trade. Using the trading profits to invest when the investing strategies indicate to buy, is another way of harnessing the power of compounding.
Tax Implications
Before you diversify your investment portfolio you should be aware of the tax implications of your investments. While some of these investment assets offer tax benefits, while others may have capital gains tax obligations. So, you must ensure that you’re aware of your tax liabilities and are able to harness the benefits that comes with these assets responsibly and wisely.
Investing Psychology
Investing in stock markets is not just about numbers and how much you make; it’s also about emotions. During a recession, fear and uncertainty can lead even the most seasoned investors to make impulsive decisions. In such times, it is extremely important to stay patient and disciplined. One should remember the power of compounding, where their money grows exponentially over the long-term.
How can you get started?
To start investing and trading in stock markets, you’ll need a demat account and a trading account. You must choose a reliable full time service broker to execute your trades and make your long-term investments. Fortunately, there are a lot of full-time service brokers available now-a-days. Some of them even offer stock market courses online free with a certificate, which are one of the best ways for beginners to learn the ropes of trading and investing.
Resources and Tools
The internet is a vast sea of resources for first time investors. From mint to moneycontrol, forums to books and courses, there’s load of information at your fingertips. Apart from that, you can’t forget to explore market analysis tools like screener.in and several apps that can help you make informed and well researched decisions.
To sum it up, investing or even starting to invest during a recession in India can be a wise financial move, even for beginners. After understanding the basics, setting clear goals, diversifying your portfolio in various assets, and sticking to your strategy, you can ride on the recession rollercoaster with ease.
You must also remember that though making investments during a recession carries risks, it also presents numerous opportunities. You can take advantage of the power of compounding and informed decisions, while working towards your financial objectives.
Investing during a recession in India might seem scary, but with the right knowledge gained from stock market paid course and a carefully crafted investment or trading strategy, it can be a rewarding journey. You can always take your time to learn, stay informed, and make well-informed decisions as you start on your investment adventure through free resources or top 5 online stock market courses in India.
Disclaimer: Please note that we’re not SEBI registered investment advisors. While this guide offers valuable information towards investing, it’s essential to consult with a financial advisor before making any investment decisions. Please utilize this information for educational purposes only, and don’t treat it as a direct or indirect tip, in any situation!
