Since ages markets have been volatile and have exhibited cyclicality.

Most investors end up on the wrong side of the cycle and thereby lose out on the opportunity of wealth creation and even end up losing principal.

Below, we have produced a set of numbers which clearly reflects that you can do well in the stock market if you invest during cyclical downturns.

Source: moneycontrol.com

What does the above indicate?

In the above illustration we have taken values of BSE Small Cap Index over the last 13 years. As can be observed, there have been 4 major years of decline including the recently concluded 2018.

However, what is important to note is that every-time there was a major correction, the subsequent 3 years delivered amazing returns to the investors and that’s basically the key to investing.

Unfortunately, most investors start investing closer to the peaks, see a subsequent major correction, get disillusioned and then either stop investing or take a vow to exit once they recover the principal.

You could increase your chances of making money with the stocks disproportionately by simply understanding the cyclical element and using it to your benefit.

 

Best Regards

Ekansh Mittal
Research Analyst

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