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Double Your Income series: Can I boost my income even if the economy is slowing?

The Indian economy has hit a rough patch. Whatever the reasons may be, it is as normal as an airplane hitting a patch of turbulence. It’s no reason to jump out of stocks, especially when so many of them are trading cheap.

November 28, 2019 / 03:34 PM IST

I am often asked this question.

The short answer is yes.

But you deserve a longer answer from me. You see, I’ve embarked on a project to develop a fool proof system to double one’s income.

But I also acknowledge that it's challenging to be an investor these days. If you open the newspapers bad news will come pouring out at you.

Car sales are crashing. Rural India is in distress. People are losing jobs. GDP is going down. Even Rs 5 biscuits aren't selling!

How do you think of investing in the stock market at such a time?

A friend of mine who is a doctor told me the other day he stopped his equity SIPs. I did not find this surprising. When the economy looks rough, and there’s bad news all around, stocks are considered 'risky'.

In such times, even a minor decline in the market scares away many investors. They either head for the exit or stay away for a long time. This is what’s happening today. People are not falling head over heels to buy stocks.

But this is a mistake!


The greatest irony of the stock market
Legendary investor Benjamin Graham used to say – "The investor's chief problem and even his worst enemy is likely to be himself."

It's not very difficult to see why.

Every investor in the stock market wants to buy low and sell high. Yet, we have a situation where when the market was at its highest in 2018, investors were tanking up on stocks. Stock tips from a barber were enough for them to go out and buy.

Today, when hundreds of individual stocks are selling for so much lower, they are dumping them and staying away.

But what about the economic slowdown, you ask?

Well, what of it?

When your airplane hits a turbulent patch, you should put on your seatbelt. You don't jump off the airplane, do you?

It’s the same with your stocks too.

The way I see it, the Indian economy has hit a rough patch. Whatever the reasons may be, it is as normal as an airplane hitting a patch of turbulence.
It’s no reason to jump out of stocks, especially when so many of them are trading cheap.

This is why, for my Double Income project, I don’t let the slowing economy come in the way of my decision making.

In fact, I’ve back tested my Double Income strategy for many years. I am fully confident it can withstand this tricky phase of the market and come out on top.

Watch this space for more on Double Income!

(Rahul Shah is Equitymaster’s Co-head of Research. He has more than 16 years’ experience in equity research and building investing systems.)

[This article is a joint initiative by Moneycontrol and Equity Master.]

Rahul Shah
first published: Nov 19, 2019 03:46 pm

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