Are you well prepared to face bear market?
In my last post, I’ve discussed how you can get benefit from a bear market (to read that post, Click here).
Today, I’ve come with a very interesting quiz session. From this question-answer session, you’ll find that whether you are financially and psychologically prepared for a downturn in equity market or not.
Choose the answer of the questions. The point of each answer will be the as follows:-
A: 1 Point, B: 2 Points, C: 3 Points, D: 4 points
Sum up all the points and then see the score card to know your current condition.
Quiz1. How do you invest in Equities? Mode of investment in Equity:-
A. Buy equity stocks directly. Don’t go for indirect investment like mutual fund.
B. Buy Equity stocks mostly but also invest in Mutual Funds.
C. Mostly invest in MFs but sometimes direct equities also
D. Invest only through MFs
Quiz2: How much of your Equity Investment is in Mid and Small Cap stocks?
A. I don’t invest in such a way. No idea.
B. More than 50%
D. Less than 25%
Quiz3: What did you do with your equity investment when market crashed in 2008?
A. Withdrew all my holdings from the market with a big loss
B. I had stopped investing totally and sell off my position when market slightly recovered
C. Rebalanced my overall portfolio and bought more stocks
D. I never stopped investing, Continued investing to take advantage from lower prices
Quiz4: What will be your action plan if equity market or Mutual funds fall by over 30%?
A. I’ll exit with losses and will like to invest my hard earned money in a safer option
B. I’ll wait till the price recovers at least to my buying price and then I’ll exit
C. I’ll rebalance the overall portfolio
D. I’ll buy more equity stocks or MF units to take advantage of lower prices.
Quiz5: If you have invested some money in equities then within how much time do you need that money?
A. Within 8-12 months
B. 2-3 years
C. 5-8 years
D. More than 8 years
Quiz6: From where have you got the money for investing in equity market?
A. I’ve borrowed the money from my friends, relatives or bank
B. Have withdrawn from other investment
C. Have raised this money by selling other aseets, like- gold
D. Surplus money meant for investment
Quiz7: How much of your total portfolio is in cash?
A. No cash. Fully invested
B. Just 5-10% cash
C. 10-25% cash
D. Have more than 30% cash
Quiz8: What is the frequency of rebalancing of your portfolio?
A. Never did
B. A few years ago
C. When there is need and uncertainty
D. Do it once in a year
Less than 12 points:
A bear market situation may be shocking for you. It will be better for you to consult an expert for your investment or just shift your investment to a safer option , like FD/TD.
Your risk tolerance is low. Stop investing in direct equities. Rely on Mutual Funds and other investment options. A bear market situation may upset your plans.
You are fairly well prepared to face the challenge of bear market but need to increase your risk tolerance level. Take long term perspective when investing in equity market. Keep enough emergency funds in hand.
Very Good! You are well prepared to take advantage of a bearish equity market. Your financial situation is comfortable and you are ready for a long term investment in equity market.
Bull and bear condition in the equity market is the two sides of a coin. If you love the bull market then also should be ready to face the challenges in the bear market. Normally a bear market condition may extend from 1 year to 3 years. To keep you safe in the bear market situation, maintain the below mentioned rules and never find yourself trapped into any financial problems.
Invest only the surplus money in equity. Make sure that you do not going to use this money not before than 6 years.
Never ever borrow fund for investment purpose.
Maintain well balance in different stream of investment. Rebalance the portfolio at least once in a year.
Don’t go for Future & option unless you have good knowledge in these instruments.
Make step by step payment method in direct equity in bear market situation (refer my earlier post).