💵 strategize in the time of corona
Effective ways to pick stocks amid high volatility.
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This was me, a 21-year-old graduate who had no idea what stocks were, let alone how to invest in them. Regardless, I started investing but it seemed more like gambling because, again, I had ZERO idea.
And I know there are many 21-year-old (and older) investors out there today facing a similar situation. That too, during such volatile times. But if you’re one of them, then this post is for you.
So, what are stocks?
Suppose you want to start a business. Naturally, your first goal is to raise money. So you take out your savings, borrow money from your friends and family, and even take out a loan from your bank. But you're still short on cash. That's where stocks can help you.
For a specific price, you can allow people (investors) to own a piece of your company. And that small part of your company is what's known as a stock or share.
But for that to happen, you need to first list your company on a stock exchange — a place where people can buy and sell your stocks. There are two popular stock exchanges in India:
Bombay Stock Exchange (BSE)
National Stock Exchange (NSE)
Now imagine all this happening but on a much grander scale. That's what's called a stock market. It's a platform where buyers and sellers trade in a range of securities like shares, bonds, derivatives, etc.
At this point, you might be wondering: What if I don't want to start a business? What's in it for me then?
Well, if the company you're invested in makes a profit, you get a part of it that's proportional to the shares you own. So it's a win-win for both.
Not so fast!
Before you start investing, let's first address the big elephant in the room: the COVID-19 pandemic.
When the pandemic first hit the world last year, its impact was devastating. Companies scaled down operations, layoffs were at their highest, sectors like hospitality, tourism, and healthcare came to a complete halt. In fact, it was even worse than the 2008 financial crisis, which was pretty crushing in itself.
But this incident didn't deter the spirit of investors. While the global economies were in decline, investors saw this as an opportunity to make a profit.
Even today, the stock market is performing pretty well as compared to India's economy, which is still grappling with the second wave and preparing for a third.
Why the disconnect? Because profits made by companies during COVID-19 came from renegotiating terms with suppliers, employees, and contractors. Also, the RBI's decision to lower interest rates on saving schemes and FDs further invited more participation in the stock market.
That said, it's still risky to invest in stocks now and you should always, always do your research.
We get it. And here’s where we can help!
While we can't choose the best stocks for you, we can guide you towards building a solid strategy for investing in stocks amid COVID-19.
Share what you learn 🤝
“Buy not on optimism, but on arithmetic.” – Benjamin Graham
Opinions about which stocks are better or worse are too many. But real wisdom comes from doing your own research. And the best way to do that is by collaborating and sharing your learnings with one another.
If you found this newsletter insightful, share it with your friends and colleagues and let us know what you think.
Until next time 👋