It is always important for investors to understand how much the MICEX index can fall, what kind of falls were in the past, what periodicity of these falls and duration to pick the best time to invest in russian stocks (Gazprom, Sberbank, Rosneft, Mechel stocks).
The falls
The strongest falls in the MICEX (Russian stocks market) index:
09.1997 to 09.1998 = for 13 months the MICEX index is 80%. Russia's default on government bonds (a prolonged fall in oil / gas prices + an unbalanced budget).
03.2000 to 01.2001 = for 11 months the MICEX index is 50%.
05.2008 to 01.2009 = 9 months of the MICEX index -72%. The global financial crisis caused by the US mortgage crisis (capital outflow from Russia + short-term drop in oil / gas prices).
The number of falls in the MICEX index:
The maximum falls (3): -80% in 1998, -50% in 2000 and -72% in 2008;
In the range (-40% -30%) there were (6) falls: 2001 (1), 2004 (2), 2006 (1), 2009 (1), 2011 (1);
In the range (-30% -20%) there were (7) falls: in 2002 (1), in 2003 (1), in 2007 (1), in 2010 (1), in 2012 (1), in 2014 (1 ) and in 2017 (1);
In the range (-20-10%) there were (11) falls: in 2005 (1), in 2006 (1), in 2007 (3), in 2010 (1), in 2012 (1), in 2013 (1) , in 2014 (1), in 2015 (2),
Corrections of less than 10% occur regularly.
Since the beginning of the calculation of the MICEX index in 1997, there were 3 strong falls: in 1998 (-80%), in 2000 (-50%) and 2008 (-72%) with a duration of 9-13 months. To protect your capital in case of such falls and get possible to buy cheap shares, you need to keep short bonds with a maturity of up to a year (preferably no more than six months), so as not to sell bonds on the market, prices are also declining (they even remember 1998 ., can default, but I think now it will not be difficult to see the budget and gold and foreign exchange reserves of Russia, in order to assess the likelihood of such prospects. Such index falls, of course, are rare phenomena, but no one will ever say what will be the cause of the next global crisis and when it happens.
Decrease in the index in the interval (-40% -30%) has not happened since 2011, although earlier this occurred at a frequency of once every 3 years, lasting 3-5 months before further growth.
In the range (-30% -20%), index falls occur at intervals of 1 every 3 years with a fall duration of 2-5 months. Such corrections, for example, were in the first half of 2017 and in 2014 after the deterioration of Russia's relations with the EU and the US and the reduction in oil prices, which led to the devaluation of the ruble and the Central Bank was forced to raise the key rate. It was difficult to get out of bonds in such a situation and you had to wait for a decrease in the rate or repayment of short bonds.
In the range (-20% -10%), corrections occur most often - every 18 months.
What conclusion can be drawn from this? It is important to remember that the lower the value of the index, the greater the proportion of shares should be in the portfolio. Bond prices may drop significantly in the event of a global crisis with an index drop of over 50%, and here (for those who are shifting from bonds to shares), only a short period before bonds can be saved. In all other cases (correction -25% or less), as a rule, bonds in the price decrease insignificantly and they can be sold at a market price, without waiting for repayment. An exception to this may be the situation when the Central Bank raises the key rate in order to combat inflation (devaluation of the ruble) (remember the year 2014). Then the prices of bonds with a constant coupon can significantly decrease, they will be uncomfortable selling at the market price and they will have to wait for either repayment or reduction of the key rate.
The gains
The strongest growth of the MICEX index was after the crisis falls of the index:
from 09.1998 to 05.1999 = for 9 months the MICEX index + 650%. Before that, there was a historic decline of 70%.
from 05.2005 to 04.2006 = for 12 months the MICEX index + 187%. Prior to this, there was no reduction.
from 01.2009 to 06.2009 = for 6 months the MICEX index + 129%. Before that, there was a historical decline of 72%.
What is better - to wait for the global crisis to buy shares, buy on corrections or buy now?
Nothing can grow so much as what has fallen. The strongest upward trends occur after powerful declines and the ideal moment for buying shares is, of course, crises. At these moments (if you have cash) you do not need to be a genius investor, it's enough just to buy the largest reliable companies or look at what has fallen much more than the market as a whole. This can happen, for example, if a large fund holds a package in a particular paper. When will 2008 repeat? Due to the large interdependence of capital flows, problems in the US, China or other countries can lead to sales around the world, including in Russia. Or is it an aggravation of the confrontation between Russia and the West that will lead to a powerful fall? Will they ban investing in Russia? The MSCI Russia index will be abolished? The US will not allow the formation of ETFs with Russian securities? Who, as far as fantasy enough to come up with the reason for the next strong correction.
Sale, as in 2008, has to wait a very long time, the more it will be very difficult for the investor to determine when to buy shares: on correction - 50% or - 60% or - 70%. The private investor has much more advantages in this plan than the fund, as the fund will be in stocks during the crisis, and a private investor may well encounter a crisis with deposits, cache, bonds.
But the fall in the interval (-30% -20%) is not such a big rarity in the Russian market. In my opinion, any correction over 20% can serve as a good signal for investing in russian stocks (Gazprom, Sberbank, Rosneft, Mechel stocks).
On the Internet, you can find such an investment approach that everything is now cheap for P / B multiples, the more the Central Bank reduces the key rate, which will cause a revaluation of the shares. The first thesis is generally ridiculous, since in this way stocks can not be evaluated. Companies do not go bankrupt in order to evaluate them at the cost of assets. This approach works when you need to justify your purchases and convince uninformed beginning private investors that they will be able to get rich quick. The second thesis in theory is true, but the market at the moment is likely to be more influenced by Western rhetoric, the inflow-outflow of foreign capital and sanctions than factors from the economy book.
Conclusions
In our opinion, there are two main conservative investment approaches for a private investor:
Wait for a correction of over 50% for the purchase of shares of the most reliable monopoly companies or promising companies that fell more than the market as a whole. In the period of waiting for the crisis, keep the capital in deposits or short bonds. Then 2 options: a) sell shares with a return of 150% -200%, since this is a very real trend after a strong fall; b) shares do not sell and save dividends from these shares, reinvesting them into bonds or deposits and waiting for the next drop in shares to be 50% or higher.
Look for strong equity shares or dividend-bearing securities that have the potential for growth in payments (not at the expense of lowering the share price, but by increasing profits or increasing the dividend payment base) and buying them when their price is unreasonably low and have growth potential. But again - to buy shares on any correction over 20%. This happens every year and a half.
These two approaches can be combined.
The main thing is not to rush to buy shares (especially when the MICEX rewrites the highs) and do not buy shares of not very promising companies just for the sake of diversification.
The safest option is the initial distribution in shares: 20% of the stock - 80% of the bond. These 20% are formed from such dividend ideas as Lenenergo or Mechel in the period of growth in indicators (which allows you to get a profit above market) or clearly undervalued and reliable shares (for example, Gazprom below 120 rubles or Sberbank under 100 rubles). Here, of course, there are also risks, but they always become smaller if you are able to catch the minimum prices. As soon as such ideas appear on the market, the investor is shifted from bonds to shares, but still has to leave part of the capital in case of global market falls, in which the investor completely moves into shares, forming a portfolio with minimal risks with the maximum growth potential.
What to avoid:
Purchase of shares with a large "shoulder", since the issue of your bankruptcy becomes a matter of time;
Purchases of shares of growth, as they fall rapidly during the period of market correction;
To form a portfolio entirely from stocks, when the MICEX index is near historical highs, as corrections by 20% and above are guaranteed and it is also only a matter of time.
Imconsultant.ru - expertise at investing in Russian Stocks.
or Mechel 
in the period of growth in indicators (which allows you to get a profit above market) or clearly undervalued and reliable shares (for example, Gazprom 
below 120 rubles or Sberbank 
under 100 rubles). Here, of course, there are also risks, but they always become smaller if you are able to catch the minimum prices. As soon as such ideas appear on the market, the investor is shifted from bonds to shares, but still has to leave part of the capital in case of global market falls, in which the investor completely moves into shares, forming a portfolio with minimal risks with the maximum growth potential.