How to invest in the falling market. Part 3
Earlier: part 1, part 2
On what money will buy
pertinent Here to point here to what: all these games with stock market need to be carried out on absolutely “free“ money. That is, in - the first, there is money necessary for you for everyday life.
In - the second, there is money which forms your reserve on a case of unforeseen circumstances - an illness, the dismissal and other events separating you from a monthly source of the income in a type of a salary. As a rule, this reserve has to allow you to live in an autonomous state from three to six months. It is considered that in normal conditions of this term it is quite enough to find to themselves new work, that is a new source of monthly receipts.
In the third, there is money which you allocated for realization of the medium-term purposes - annual departure with a family on the seas, acquisition of the car, a fur coat for the wife and td.
In the fourth you for certain have some serious long-term goals - purchase of the apartment, the land plot, building of giving, payment of training at institute of the offsprings etc. And you carry out the main accumulation just on these purposes.
And only after filling of the designated accumulative tanks, you can consider the sums which remained over it superfluous, so free and bring them on stock market for stock acquisition on strategy of averaging of the price.
Of course in the light of last and forthcoming crisis events all our savings are subject to risk of fast depreciation, but it does not mean that we have to spit everything and bring them on stock market in hope to rescue at least part of their purchasing power.
It is possible to use some part of the means accumulated for realization of long-term goals, placing it in stock market - would be unreasonable absolutely not to use such most profitable tool as stock market. However this part has to be small and take place only in stocks of blue chips - the stable competitive and known companies.
Need of different accounts for speculative and investment operations
Moreover, for the speculative transactions focused on receiving profit on falling of stock prices, and about what I speak - about long-term investment you have to have two different accounts. At the same time you have to mentally forbid to transfer money from one account to another, to build between these accounts in images speaking an insuperable Chinese wall. Why it needs to be made that is why money needs to be divided? Because you would will have a mass of situations “Here to me still slightly a money and then I will precisely hold on and will wait for profit!“, but actually all will end with the fact that you will merge money from both accounts.
What there will be term of post-crisis calm in stock market and what at this time to do to the investor
If all - to consider stock market as reflection of an economic situation of the country, and the change in price of an action - an indicator of change of a condition of the company - the issuer, then the period of restoration of the market will coincide with the period of recovery of all economy.
What duration there will be this period called by economists a depression - besides nobody knows. Everything will depend on the speed of implementation of the political changes necessary to start real change of the current situation.
Overthrow of the governments a people at large or not such painful reorganization from above that, of course, it is less probable - inevitable accompanying or even necessary processes for creation of new economic model. Speed of all this reformatting will be defined not by economic factors, but the political changes initiated first of all by the population.
All this can take at least several years - quickly it is not necessary to wait for the first green sprouts.
Despite everything told the investor has to and at this time - the depression period - to continue stock acquisition to enjoy their growth at the introduction of world economy in a favorable phase of the development.
What shares of the companies should be taken during a collapse of the market
Traditional methods of search of such companies are inapplicable
For a start we will note that the answer to this question cannot be given by such methods of the analysis of cost of the company as discounting of its future profits. Incapacity of such approach is caused by impossibility of forecasting not that of level, and in general existence though any profits. These methods are good in conditions normal or a high economic environment, but we do not see them usefulness in the conditions of economic recession.
The companies profits, large on volume, sales and assets - domestic blue chips
So during falling of the market it will be necessary to acquire shares of those companies which will manage to overstay the period of an economic distemper, that is that which will survive after a depression. We dare to assume that the largest companies - large on sales volume and assets will be those. Many from such the company are domestic blue chips and enter share indexes of MICEX and RTS.
Why the size in this case matters? Because these companies should work to themselves at a loss that, perhaps, will demand sale or elimination of the assets, because of their transformation into high cost ballast. Naturally big mountain of snow will longer conceal, than the mountain smaller.
Also these companies can count the companies daring to count on support of the state on support from the state - both through various subsidies, and due to placing orders. The companies will have especially advantageous position backbone which elimination can lead to social shocks with all that it implies.
The companies showing an efficiency maximum
Continuing to narrow selection - it is necessary to choose the most effective as years of a high economic environment created the financial fat providing their existence in lean years of a depression at such companies from the large companies. Besides high efficiency of use of assets means smaller need for them, in comparison with requirement at less effective competitor. Respectively the smaller volume of assets means the smaller volume of their necessary elimination both smaller falling of book value of the company, and, so smaller falling of the price of its actions.
Why stocks of the large known companies fall not so deeply and are restored quicker
Besides, stocks of large known and highly effective companies fall not so deeply as stocks of the average companies and even if falling is considerable, the speed of restoration is usually higher than average market. It is explained by the fact that some participants of stock market sharp-sightedly monitor such stocks and try to get them as soon as they fell in price. Thus reduction of price due to dumping of such actions by nonprofessional investors is compensated their acquisition by investors professional. This balance of a supply and demand also keeps the resulting price at the level higher in comparison with stocks of the other companies.
The companies focused on domestic market It is desirable for
that these highly effective large companies were focused on domestic market. This moment is important because in the conditions of fierce competition, the states will not be able to adhere to the principles of free trade and will be in all ways to protect the domestic market from foreign producers. According to benefit to receive those companies which trod a path to domestic producer for a long time that is his products are familiar to us, we use them and we note their satisfactory quality.
Given about the share of the market occupied by the company on this or that product it is possible to find on the website of the company or in its reporting.
We reveal ability of the management of the company to resist to crisis
Besides the scale of the company, its efficiency and extent of orientation to the domestic consumer, also readiness of the management to resist to the crisis phenomena is of great importance. First of all we mean readiness psychological - to work, but not to be idle, expecting self-solution of problems.
What actions for revival of the company its management in time can take and after crisis
Physically activity of the management develops into development and implementation of productive plans for optimization of activity of the company:
- increases of productivity due to use of more technological equipment;
- dismissals of part of personnel - as it is sad - for the purpose of reduction of costs;
- replacement of the raw materials used in production by cheaper substitutes;
- attempt to expand the occupied share of domestic market due to replacement of competitors and td.
In this case active work, let and not in so susceptible external environment, is better than simple expectation.
As it it will be possible to predict how it was
As management of the company in the conditions of the second wave of crisis will behave it is possible to predict on the basis of his behavior in the period of the first wave of 2008. Some companies, let and not at once, and only on passing of a state of shock, began to take actions for optimization of each link of the chain of value creation - both to reduce personnel and to introduce technologies and to be reoriented on internal the markets, starting new product lines and td. All this was visually visible when reading annual reports of the companies. Other issuers did not trouble themselves any activity, being content with loans in stock market and the expected help of the state because of backbone value of these enterprises.
So, the investor can download the corresponding annual reports from the websites of the company and look at efforts of the guide to an exit from current situation, according to risks of the company and development of programs of reduction of their probability. And it is possible and to request directly explanations on the matter by e-mail from the representative of the company for public relations.
How different have to be the companies in the investor`s portfolio - the question of diversification Naturally global economic crisis will affect with
all companies in the identical direction, but degree of its weight, perhaps, will differ from branch to branch. Therefore in a portfolio of the investor there have to be companies from different branches, as will allow to compensate risk of extremely difficult situation of one branch at the expense of more favorable condition of other branches.
If to fall by level made production and services, then the investor has to form the portfolio of the companies different from each other as follows:
- properties and qualities of production of the companies have to be different;
- is production - technological features of a chain of creation of production have to be different;
- production of the different companies has to have different consumers;
- phases of business cycles at the companies should not coincide with each other, and it is even better - there is in an antiphase that is if branch of one company to seek for recession, then a branch of other company - to peak.