Is waiting for crash a good strategy?

You want to start your journey in the Stock Market. You have heard how people have created massive amount of wealth over a long period of time using the power of compound interest. But as soon as you are ready to invest your hard earned money, you notice something. The Stock Market is at its all time high! You have heard horror stories about people buying stocks at the top of the market and end up taking heavy losses or maybe you have heard the good old quote “Buy the dip”. So you decide to wait for the dip. But it seems that the stock market has other plans and keep on moving upwards. What should you do? Is waiting really a good strategy?

My simple answer is NO! Waiting for the stock market crash is never a wise strategy. First let’s be clear. A stock market crash is when the index (Nifty or Sensex) falls more than 25-30% from it’s all time high. Please do not consider a 10% fall as a ‘crash’. That is merely a correction which is a part of the game called the stock market. Corrections happen almost every year. But does a crash happens so regularly?

So everyone remembers the 2020 Coronavirus pandemic crash because it happened so recently. But when was the last time a stock market crash happened before that? Don’t remember? That’s because it happened 12 years before 2020 (2008 mortgage crisis). Stock Market crashes are very rare and generally happen only once in a decade. Here is the list of stock market crashes –

  1. Harshad Mehta scam (1992)
  2. Dot com bubble (2001)
  3. Real Estate Mortgage Crisis (2008)
  4. Coronavirus pandemic (2020)

So, in the past 30 years there have been a grand total of 4 crashes. Out of which the recent Coronavirus pandemic crash happened only 1.5 years prior to writing this article. The conclusion is simple. There is a very low probability of another crash for next 4-5 years. Of course there is no guarantee that the markets won’t crash tomorrow but the math is in our favour.

Now the question remains – should I invest at an all time high market? If you are a new investor who has absolutely no exposure to the stock market, then the answer is a resounding YES. Even when the stock market is at an all time high, it is a perfectly good time to start your investments. That doesn’t mean put all your life savings into the stock markets at once (never a good strategy). But if you wish to start with your investments then the longer you wait the worse it gets. Stock markets make news highs every few days, months or years. If you have no exposure to the stock market then your money is just sitting in your bank account losing value every single day. Once you have invested the initial amount then the best idea is to accumulate good stocks whenever there is any correction (remember – this happens almost every year).

Like the great Peter Lynch once said “Far More Money Has Been Lost By Investors Preparing For Corrections, Or Trying To Anticipate Corrections, Than Has Been Lost In Corrections Themselves.”

So please do not make this mistake.


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Namit Pandey

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