Five Golden Rules- Buying Stocks in Volatile Market
1. Look at Individual stocks, not the Broader market
When the market is falling, even good quality stocks may tumble. This presents an opportunity for stock-picking.
2. Go for Earnings Visibility
Buy stocks with a clear earnings visibility, strong balance sheet and stable cash flow. Dividend stocks are safer bets.
3. Don’t Invest at One go
Even though stock prices are low, stagger your purchases over time. Put in only 10-12% of your total outlay right now.
4. Avoid Value Traps
Several stocks are trading at multi-year lows. This does not necessarily make them good buys because they could fall further as the economy stalls.
5. Don’t Touch Debt-laden Companies
Stay clear of companies that have borrowed heavily overseas, as also those with poor corporate governance practices.