Stock markets around the world are in bad shape from quite some time. Not many investors are happy about the situation and they are not investing as they used to some 5 years back. The investors have lost the hope of something good is going to happen in near future. The markets seem very dull these days. In this period of time also one can analyze the situation and park in funds. It does teach you many things that otherwise we would not have noticed.
When things are going good, an individual cant easily notice which company is good or bad. When the Indian stock market hit 21k levels almost all the companies were good, everybody thought that if you invest in any company then it is sure that things will go good and one will reap benefits. This notion prevailed in the investor’s mind and everyone was happy. But the real investors who knew the value of the company and the situation just did not get into this mess. They just sold their shares at the right time and did exit from the market.
Can you imagine a web designing company with no big technology to boast about was considered a good option and people actually invested in it and it was trading at Rs.60 – Rs. 80 range. I don’t think this made sense but during the time of boom everything looks good every option is a good one. People close their eyes and invest. The same company some months back was trading at Rs.10 – Rs.15 range. Now it is back at Rs. 40 – Rs. 60 range.
If you are a long term investor you would not be choosing such companies. Do you? It does not make any sense to hold onto such companies even if you have invested by mistake. Sell it and get the money and invest in companies which actually make sense. There are many good options and even during the slump the value of the shares did not go down that drastically. You can also get to know how the company reacted during the slump situation. Companies that continue to profit – or at least lose money at a slower rate – in a downturn can often take advantage of depressed prices to expand their businesses and snap up assets on the cheap.
Cash on hand, much like your personal emergency fund, is one measure of how vulnerable a company is when profits slump. Companies that perpetually overextend themselves in good times are easy to spot, as they languish and burn up their cash reserves in hard times. If you already have a regular schedule for checking into your holdings, don’t change it because of an economic dip. Do, however, note how they are handling things and whether or not cash reserves are being used up. If you still like how a company is acting, it’s a good time to get more on the cheap.
So charts do teach you many things about the company so keep your eyes wide open and invest suitably. Don’t rush in and invest and follow the herd. Be sensible. Look into the previous history. Spend some time knowing the company that you are going to invest and then invest. There is no need to be in a hurry. Things that go up will come down and that which is down will go up one day. you will get your chance.
Engineer's Finance 