As individuals’ economic situation looks grim, and with job losses, the obvious question does arise if there is an opportunity to make substantial profits by stock trading as the markets are crashing.
If you are thinking of investing for a long term, say 5, 10, 15, or even 45 years, then you can go for it and invest in stocks, then you can close your eyes and invest in it. The opportunity is as good as it gets.
Although the GDP has experienced negative growth for two consecutive quarters in the first half of 2022 in the U.S., Stocks are said to give good returns. Furthermore, profits often increase over the long term, despite the occasional contractions of the GDP. However, despite the recession, there are still solid equities to buy.
The stock market is forever correcting itself, and as a result, the price of the stocks fluctuates, so if you have been investing in stocks bit by bit over a long period, you may have noticed this cyclic price trend of the market being bullish turns bearish and then bullish once again. And these price fluctuations are welcomed by traders since they present an opportunity to exploit and make a substantial profit.
However, it is not as easy to predict and have a contingency plan to avoid a market crash. If it were, then a market crash would never occur. Nonetheless, you can mitigate the risks by studying the market closely and exploiting it, making a massive profit.
As a thumb rule, you should understand the market dynamics and choose stocks based on your research that will give you good returns. You should always spread your risk by having a mixed bag of stocks in your portfolio based on your research.
The Blue-Chip companies‘ stock price fluctuates a little; thus, having a portfolio with these stocks can be advantageous. When the market crashes, the overall valuation of your portfolio will take a hit. Still, such a hit would be milder if you consider the overall opportunities that a market may be facing. Thus, you can be assured that the valuation of your portfolio won’t hit rock bottom. In the long run, you will make a good profit as the market scenario improves.
Some stocks are volatile, and these are generally stocks belonging to new companies that have yet to become big. Since their future is unstable, unlike Blue-Chip companies, with inherent volatilities, they promise a substantial return in the future. These stocks can also be traded by Day traders and scalpers, as they exploit the volatile nature of such stocks. However, you should do thorough research and have some stocks like these in your portfolio.
Plenty of volatile stocks in your portfolio can be dangerous because when the market crashes, these stocks lose their valuation faster than ink drying on paper.
As mentioned earlier, stock trading them daily is very profitable as the market crashes. A bullish run is quite slow compared to a bearish run which falls faster.
After careful research, you can also include under-valued shares in your portfolio when the market is crashing. Then, you can hold on to these shares for a few months before selling them off.
Warren Buffet, a well-known financial guru, acknowledges that he is more interested in searching for under-valued securities rather than predicting the market.
His approach towards the market is to buy under-valued stocks for a good price. As per him, such stocks will go down if you consider short-term goals; however, from a long-term perspective, they will grow and give outstanding results.
Even investing in a growth stock near the peak of a bull market run is not necessarily fatal. On the contrary, a correction or crash can spur growth even though growth stocks often lose value considerably more at those times. Moreover, opportunities for businesses with management teams focused on long-term growth prospects are frequently presented by economic shocks that cause a ruckus in the stock market. In other words, even if your stock drops, it can rebound much stronger. For growth stock investors, economic turbulence is a terrific opportunity.
A slight price drop may scare away some investors who fear further losses. In reality, a market correction rather than a crash, or a drop of more than 20%, is considerably more likely. A correction is a decline of more than 10% but less than 20%. Corrections to the stock market often occur once every two years or so. They can be an excellent way to purchase stocks for a momentary discount.
The ideal time to trade stocks.
If you are considering stock trading in the market for the long term, it does not make any difference for you to buy or sell stocks when the market is open. This is because the stock markets are open from 09.30 a.m. ET to 04:00 p.m. ET on regular trading days.
It’s crucial to understand that day trading and investing are two distinct activities. When you purchase stock in a firm, you are investing. Investors benefit from a significant increase in the value of their shares if the company performs better than expected.
When you purchase and sell stocks quickly, or “day trade,” you aren’t thinking about the core business principles of the company they represent. Both can be lucrative, but turning a profit as a day trader is quite challenging. Becoming a successful investor is much simpler.
The ideal day of the week to buy and sell stocks.
The markets are open five days a week, and trading is done regularly throughout those five days. As a result, many investors treat Mondays as not the ideal day of the week to buy stocks.
However, according to a comprehensive study by Arizona State University research in 1975, there is no “Bad Monday” or market having “Monday Blues.”
If you have the cash ready, invest it, as the market mantra is any time is a good time to invest in the market.
The ideal month of the year to buy and sell stocks.
Generally, people do not care about how the market behaves; for them, stocks are a way to reduce the financial tax levied by the government on their holdings. Thus, it has been observed that many tend to sell stock in May and sell them during the year ending, also known as the “January Effect.”
However, it makes no sense to treat stocks to get tax benefits; you can always approach the market and make the most of it throughout the year.
Many who have a job or a business always treat stock trading as passive income. And as we already stated, there is no such time as an excellent time to invest in stock; anytime is a good time to invest.
