Should new investors stay away from this market?

If you are a new investor, chances are that the current market crash might have left you wondering how to tread in such a market. Should you buy the crash, or should you embark on heavy selling?

The market has been rising upward in the last two years and barring a few mild corrections, the rally has been broad-based and across sectors. After steep gains of the last two years, such a jolt can trigger anxiety among new investors.

At this time, the market outlook is hazy due to the Russia-Ukraine saga, inflation, rate hikes, liquidity tapering and nascent economic recovery. One should not forget that the coronavirus pandemic is not over yet and there is always a looming risk of a new variant.

However, there is hardly any time when the market is free from worries. That is why investing gurus advise one’s investment strategies should be based not only on the fundamental factors of the market but also on one’s risk appetite and investment goals.

Experts advise new investors should stay away from highly volatile stocks and focus on fundamentally strong bluechip stocks. If they do not feel comfortable, they can choose large cap mutual funds for the time being.

“New equity investors can consider bluechip stocks. If they are skeptical, they can choose large cap mutual funds at least till March,” said G Chokkalingam, Founder & Head of Research, Equinomics Research & Advisory Private Limited.

“They can invest two-thirds of their money in large cap funds and one-third in the small cap funds till March,” Chokkalingam said.

If one wants to save himself/herself from more damages, he/she can sell loss-making e-commerce companies and buy stocks of quality manufacturing firms with good corporate governance, strong fundamentals and comfortable valuation, said Chokkalingam.

After March 2022, the market is expected to be stable as it will have factored in the headwinds such as rate hikes and liquidity tapering. With economic growth picking pace, one can start looking at good small cap stocks since April 2022.

“We see good opportunities for the small caps from April 2022 onwards. By the time, we expect selling pressures to wane, the Ukraine issue to stabilize and FII flows to slowly reverse to a positive one. On any possible steep declines in quality high conviction small caps, the investors can actually utilize the cash and accumulate those stocks gradually till the third or fourth week of March 2022,” said Chokkalingam.

The point is not to stay away from this market but to bet on quality stocks when the market valuation is low. Investing is a game in which good research, well-calculated moves pay. So, instead of panicking, buy quality stocks and sell those that have rich valuations and appear fundamentally weak.