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Should You Buy Stocks When They’re Down?

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Should You Buy Stocks When They’re Down?

When the stock market is down, some investors may shy away from making investments. And while you don’t necessarily want to buy stocks just because they are down, it could potentially be an opportunity for you to make investments at a discount. 

Sometimes, buying stocks when the market is down can be a good idea. However, the decision should be made based on rationale and not purely on the fact that the price is low. Read on to learn more about when and why you should invest in stocks when they’re down. 

Should you buy Stocks When They’re Down?

The big question is, should an investor buy stocks when they’re down? Well, the answer is it depends on the scenario. This article covers a few scenarios in which it could be smart for an investor to take advantage of decreased stock prices. 

Market Correction 

A market correction is defined as when a security loses value by 10% to 20%. Corrections can last anywhere from a couple days, months or longer. Typically, market corrections are seen as an opportunity to buy as the correction adjusts the inflated stock price. 

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It is important to remember though that how long a correction lasts can be uncertain, so timing your investment will be crucial to this strategy. Additionally, you will want to understand what is causing the correction. Factors range from long-term unemployment, higher loan defaults, a poor earnings report and bad press among others. If the factors attributing to a market correction impact the overall broader stock market, it can signal to investors that a longer-term correction is occurring. If the factors are directly related to the underlying asset, the correction period may be shorter. 

Buy the Dip

A market dip is identified as when a security’s value drops by 30% or more after a sustained uptrend in the cycle. You have likely heard advice to buy the dip, meaning to buy after the price of a stock has dropped by 30% or more. Investors focused on the long term can benefit from buying the dip. This strategy is based on the assumption that the price decline is temporary and short term. 

After a pullback in the market, prices can soar to a new high, making this strategy popular among investors. However buying the dip is all about timing the market, which can be hard to do. This strategy comes with the risk of loss; however, if you execute it properly, you can realize great returns. 

Undervalued Stocks

Another scenario in which investors might buy is when they believe that the market has undervalued the price of a stock. Markets can misprice stocks, and taking advantage of a mispricing is a strategy investors have long used. Stocks can be mispriced for several reasons including sector-specific factors, an overall market slowdown, sell-offs or an up-tick in emotional trading. 

One of the most popular ways to identify undervalued or overvalued stocks is the discounted cash flow (DCF) method of valuation. This methodology takes into account a company’s prospects for growth and profit by forecasting future cash flows and then discounting them back to the present using a discount factor that reflects the level of risk you are taking on. This valuation method will give you an implied enterprise value, which you then divide by the total number of shares outstanding, to give you the correct implied price per share. If your valuation outputs a price per share that is higher than the actual price per share in the market, it indicates that the stock may be undervalued and could eventually increase to at least your implied price per share. 

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Buying After a Sell-off

A sell-off occurs when a large volume of shares are sold in a short period of time. When this happens, share prices will initially fall because of the large volume of shares added back into circulation. Furthermore, sell-offs can trigger an emotional response from other investors who follow and also sell off their shares. This in turn can cause a decrease in the stock’s price.

While a sell-off may be disheartening to some, others see it as a buying opportunity. Because the emotional response of a sell-off can trigger selling, a stock price may deflate further than it should have. This creates entry points for other investors to buy in and take advantage of the undervalued shares. 

What is a Bear Market?

A bear market is described as a prolonged period of price declines, typically 20% or more. Bear markets tend to occur amid economic downturns and investors will be more pessimistic with negative sentiments towards the overall market. On average, in the past bear markets have lasted about 14 to 16 months at a time. 

What are the Signs of a Bear Market?

Bear markets are usually a result of weakening economies. Several factors go into a bear market, like poor economic growth, asset bubbles popping, war and geopolitical factors. Some indicators of a bear market nearing include increased borrowing cost, declining stock prices and overall negative investor sentiment. 

Safe Investments for a Bear Market

Some of the safest investments you can make during a bear market are in defensive sectors of the stock market. These sectors include consumer staples, commodities, utilities and the healthcare sector. Investing in index funds and ETFs within these sectors can also be a safe investment. 

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Frequently Asked Questions

How can I protect my portfolio from a bear market?

The best way to protect your portfolio from a bear market is to be well diversified in defensive sectors of the stock market like commodities, consumer staples and utilities. 

Should I buy stocks at the dip?

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If you believe you can time the market correctly on the dip, then this strategy can be a beneficial strategy to use. 

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Brave Group Inc

Japanese Virtual IP Firm Raises $10 Million To Accelerate Metaverse Business

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Japanese Virtual IP Firm Raises $10 Million To Accelerate Metaverse Business

Brave Group Inc., a Japanese virtual IP firm, recently said it had raised $10 million in new capital and that the company expects to use part of these funds to boost its “solution services for clients in the metaverse marketing business.” Taking part in Brave Group’s latest funding round were two local companies, foreign investment funds, as well as individual investors.

Metaverse Market Growth

A Japan-based virtual IP business, Brave Group Inc., recently said it had raised $10 million in new funding, thus bringing the total raised so far to $18 million. The company is set to use the new capital to strengthen its existing business operations and to “expand its solution services for clients in the metaverse marketing business.”

In a recent statement, Brave Group revealed that Japanese companies like Dawn Capital and Osaka Gas Co. Ltd. had participated in the round that also featured “foreign investment funds and individual investors.” In remarks following the announcement of the capital raise, Kazuhiro Ishikura, a general partner at Dawn Capital, said:

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As the boundary between real and virtual life disappears, the form of entertainment will also change, and new IP content KOLs are expected to be born. As the metaverse market grows globally, we believe that the Brave group’s content will be at the center of the enthusiastic virtual communities that will emerge. We hope that the strength of the anime and manga culture that Japan has cultivated over the years will be brought to the world virtually.

Yuichi Sakamoto, senior general manager with Osaka Gas’ innovation department, is quoted stating his company is ready to help Brave Group Inc. “realize lifestyles and businesses that respond to the New Normal.”

For his part, the CEO of Brave Group Inc., Keito Noguchi, said through the $10 million fundraise, his company would now “maximize the impact of Brave group’s IP not only in Japan but also in the world.”

What are your thoughts on this story? Let us know what you think in the comments section below.

Terence Zimwara

Terence Zimwara is a Zimbabwe award-winning journalist, author and writer. He has written extensively about the economic troubles of some African countries as well as how digital currencies can provide Africans with an escape route.

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Image Credits: Shutterstock, Pixabay, Wiki Commons

Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

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Saddle.Finance

Saddle․Finance Creates New Standards For DeFi Trading

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Saddle․Finance Creates New Standards For DeFi Trading

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DeFi is a sub-sector in the crypto industry that has witnessed significant innovation since its inception. However, the narrative has struggled to stay consistent, affecting the domain overall. The current bear market has wiped out more than half of DeFi Total Value Locked (TVL), hampering innovations. Furthermore, several projects have simply forked (copied) existing protocols and brought zero ideas to the market.

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Amidst all of this, one project is making strides with the best innovations DeFiers have seen in a long time. Saddle Finance is the protocol that enables efficient DeFi trading for stablecoins and pegged-value crypto assets like wETH and wBTC. It redefines DeFi trading by offering cheap, efficient, swift, and low-slippage swaps for traders and high-yield pools for Liquidity Providers. The protocol has facilitated over $2B in transaction volume to date.

Enabling an Efficient and Secure DeFi Trading Experience

Saddle Finance is an AMM-based decentralized exchange (DEX) running on multiple blockchains, including Ethereum, Fantom, Arbitrum, Optimism, and Evmos. It is designed specifically for trading stablecoins and pegged crypto assets.

The platform is ideal for HODLers and newbies because of its easy-to-use interface. Its strongest point, however, is that it ensures minimum slippage while swapping assets. This is accomplished through innovative liquidity pools that use the StableSwap mathematical formula to maintain market liquidity.

The protocol is also known for its top-notch security. It has been audited by some of the best auditing firms in the sector, including Certik, Quantstamp, and OpenZeppelin. Moreover, the platform is backed by several renowned venture capital firms like Polychain Capital, Electric Capital, Dragonfly Capital, Framework, Coinbase Ventures, Nascent, and BoostVC.

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The project’s most intriguing aspect is its open collaboration. Saddle’s code is completely open-source, inviting Web3 developers to join the mission and build on top of the protocol. Moreover, its recent SEMPI project has enabled developers to get compensated for developing and forking the protocol.

$SDL: The Utility Rich Token Powering Saddle Ecosystem

$SDL is the native utility token of Saddle Finance. Its use cases revolve around staking, yield farming, and governance. The platform recently announced the completion of $SDL’s first vesting stage. Thus, users who provided funds to its liquidity pools can now trade and transact $SDL tokens.

They can also stake $SDL on saddle.exchange to earn rewards and receive the $veSDL tokens. $veSDL is the vote escrowed (ve) token that will serve as the platform’s governance token. Stakers will be able to vote with $veSDL and manage the $SDL supply in associated liquidity pools. Beyond that, users can provide liquidity to the SDL/WETH pair on SushiSwap

In the future, Saddle also plans to create more initiatives to take the protocol to the next level. These include migrating to on-chain governance, adding liquidity to $SDL through Tokemak, and introducing a new gauge to unlock extra staking yield boosts. The protocol will also issue bonds through Olympus Pro to generate more protocol-owned value.

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Similarly, launching a borrowing function against liquidity providers and adding leveraged yield farming through Rari Capital’s Fuse is also part of the plan. Lastly, Saddle intends to improve its virtual swaps and launch new services where users can deploy their own customizable pools.

Building the Future of DeFi

Although the current bear market has hit DeFi hard, the sector’s long-term potential is enormous. Innovations are critical in keeping this space alive. Saddle Finance is thus heavily focused on creating innovative solutions in DeFi. Its stableswap model, along with robust tokenomics, is an excellent example of genuinely innovative solutions.

The $SDL token and its utilities across various protocols clearly indicate token-level innovation. It is now tradable on the platform. Join the emerging revolution by staking $SDL on saddle.exchange—contribute to DeFi’s future while earning passive income.


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Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

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China

Chinese State-Run Media Warns About Bitcoin’s Price Falling To Zero As Regulators Issue Fresh Crypto Warning

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Chinese State-Run Media Warns About Bitcoin’s Price Falling To Zero As Regulators Issue Fresh Crypto Warning

A Chinese state-run newspaper has published an article warning about bitcoin’s price falling to zero amid the crypto market sell-off. Meanwhile, financial regulators in Shenzhen have issued a new warning about cryptocurrency.

State-Run Newspaper Warns About Bitcoin Becoming Worthless

China’s state-run newspaper Economic Daily published an article warning about bitcoin Wednesday, according to SCMP. The nationwide newspaper is directly under the control of the Central Committee of the ruling Chinese Communist Party.

The article warned that investors should beware of the risk of bitcoin prices “heading to zero” amid the recent crypto market sell-off.

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“Bitcoin is nothing more than a string of digital codes, and its returns mainly come from buying low and selling high,” the newspaper details, adding:

In the future, once investors’ confidence collapses or when sovereign countries declare bitcoin illegal, it will return to its original value, which is utterly worthless.

The newspaper details that the lack of regulation in Western countries, such as the United States, helped create a highly-leveraged market that is “full of manipulation and pseudo-technology concepts.” The article describes it as an “important external factor” contributing to bitcoin’s volatility.

The warning from the state-run media reflects Beijing’s firm stance against cryptocurrency and related activities that the government has outlawed.

New Warning About Crypto by Chinese Regulators

On Tuesday, the Financial Regulatory Bureau of Shenzhen, the Shenzhen Central Sub-branch of the People’s Bank of China, and the Shenzhen Development and Reform Commission also jointly issued a warning that investors should be vigilant of illegal financial activities relating to crypto and how to avoid being scammed.

The notice states that virtual currency trading and speculation “seriously endanger” the safety of people’s property and breed gambling, illegal fundraising, fraud, pyramid schemes, money laundering, and other illegal and criminal activities. It also claims that they disrupt the country’s economic and financial order.

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The financial authorities cited a statement published in September last year by China’s central bank, the People’s Bank of China (PBOC), and 10 ministries and commissions declaring that virtual currency is not legal tender and related activities are illegal financial activities.

What do you think about the state-run newspaper publishing a warning about bitcoin’s price sinking to zero and the Chinese regulators warning about illegal crypto activities? Let us know in the comments section below.

Kevin Helms

A student of Austrian Economics, Kevin found Bitcoin in 2011 and has been an evangelist ever since. His interests lie in Bitcoin security, open-source systems, network effects and the intersection between economics and cryptography.

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Image Credits: Shutterstock, Pixabay, Wiki Commons, lev radin

Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

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