Horror days on the sharemarket are continually making headlines, sending companies into a tailspin as cost-cutting measures become the order of the day in a bid to meet changing economic conditions.
Investors are definitely looking for bargains. Sydney IT professional Sudhanshu Rastogi has been investing for the past two years. His investment portfolio has around $200,000 invested. Falling markets can create great buying opportunities, provided you’re careful to use the chance to buy into solid companies, as opposed to speculate, says Richard Ivers, portfolio manager for the Prime Value Emerging Opportunities fund.However, crystal-ball gazing to understand future markets is impossible, meaning you never really know if you’re buying at the bottom of the cycle, he says.Buying below the historical average will put a new investor in a favourable position in the long term.
“Of course, these valuations could go lower, but buying below the historical average will put a new investor in a favourable position in the long term, especially so in the small companies listed on the ASX who have been bid down harder than their larger peers,” Magann says.Cash is king in a recession, so companies that are asset light, have reliable earnings and can produce high free cashflow should do well in this environment, Magann says.