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Retail investors are particularly wary right now as stocks are generally beaten down; it's time to use common sense and wait out the bad times.

The existing stock market situation is best illustrated in this joke. A first-time investor goes to a fund manager and asks 'Sir, I want to become a millionaire in the stock market. How much should I put in? The fund manager replies, "Come back with $10 million."

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It's a harsh lesson that scores of Indian retail investors such as Cochin's Raj Thomas, have learnt in recent years.

Having suffered huge losses in the 2008 crash, he is a wiser man now and stays away from trading.

An avid trader, Thomas used to make as much as Rs 50,000 on a single day. But the fall of Lehman Brothers, followed by a sharp fall in markets, saw him lose his entire corpus.

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While financial advisors always ask retail investors not to invest in markets directly, a large number continue to do so and get burnt. And, for some time, things have really turned bad for them.

In fact, if one had invested when the Sensex was trading at 21,000 in January 2008, there was just one exit option, in October 2010, when the benchmark index hit 22,000 points.

There are many others like Thomas. Vipul Bhagrecha, a Mumbai-based trader, says the situation has been complicated because of low volumes as well.

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"There is a risk of getting stuck in a stock because of low volumes as well. One cannot predict a direction and take a call," say Bhagrecha.

His strategy: No fresh investments. His trading activity is restricted with the money that is already investment. The cash segment turnover of the two exchanges the Bombay Stock Exchange and National Stock Exchange is at a 28-month low, reflecting this dismal mood among retail investors.

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The derivatives segment has fared no better, with the average daily turnover at a 10-month low. But the diehard trader is yet to learn.

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With no momentum in the markets, traders are looking at commodities, especially gold and silver.

Says Abhinav Angirish, managing director at Abchlor Investment Advisors, "There has been a shift from equity to commodities, both bullion and even some agri-commodities. With little arbitrage opportunity in equities, commodities are giving them better opportunities."

In the case of Nifty, the arbitrage is of, say, 3.5 per cent, whereas in agri-commodities, it is around 12.5 per cent.

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Financial experts feel this is the time to stay put for investors. C J George, managing director of Geojit BNP Paribas Financial Services, says retail investors like Thomas and Bhagrecha should be selective and cautious when investing in a market like this.

In fact, he goes as far as advising that retail investors could look at fixed income products.

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"Unless inflation and interest rates come down, we won't see a sustained rally in the markets. Retail investors should look at products that guarantee a fixed return like fixed income products and bonds," advises George.

lso thinks there is no need to rush to buy large caps because of the interest rate impact on these.

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Instead, he says, picking in beaten-down stocks in the mid-and small-cap space is possible.

"Investing in defensive stocks is a rather vague statement. Investors should look at those companies as low exposure to interest rate risk and those stocks that have been beaten down. These are generally found in the midcap space."

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Yes, the safest and simplest way to invest is through equity diversified funds. But putting a lump sum may not be the best idea.

Go for systematic investment plans instead. As far as debt funds go, look at short-term funds like liquid and liquid-plus schemes or fixed maturity plans.