Recently we have seen the market is volatile. It once traded above 15000 and now it is around 14500 And in these times, retail investors like us make mistakes that impact our hard-earned money And today we will be discussing what should you do when the market is volatile.
5 Things to do When the Share Market Crashes
Let's start by listing the most important pointer out of the top 5.
The first and the most important pointer is Don't Panic because the biggest mistakes are made when in panic, Now assume you made a 10 stock portfolio after researching in detail about them and the market went down, you sold some stocks and bought some new ones and this increases your loss-making chances Another pointer is when you buy a stock you analyze it fully meaning you might have seen the business and the future potential and is the company deeply impacted by the 2-day crash that you have to sell the stock.
So you shouldn't panic because then is the time when the most wrong decisions are made. And if you don't panic, you can take advantage of a bear market by buying stocks at a cheaper price And if you bought a share at 200 and now it is at 150, it gives you an opportunity to buy them cheap So if you don't panic, you can benefit in the long term.
The second pointer is the right asset allocation. Whenever there is a bull run we invest our money in equities and small-cap and risky stocks and 70 to 80% of our money is invested towards equity only. and when the market falls or corrects our portfolio sees an impact Due to which it is always told to keep your investments in different assets and take advantage of diversification. So if you are an investor and you know your risk, then you should invest some in equities and some in debt So that you can maintain your asset allocation even if the market goes up or down and your overall risk will not change. If it is at 40% in equities it will remain the same if the market is at 16000 or 20000, To benefit in the long run, do not shift your asset allocation at the time of a bull run and keep it diversified.
The third is allocation to defensive stocks. There are certain stocks and sectors which are not impacted by the economic events. It is said that when you invest in equities, you expose yourself to market risk, So you invest in some sectors which are defensive and some cyclical which gives returns Hence it is always said to keep some money in the defensive stocks.
because they will help in capital preservation. If the market is going down, the defensive sector won't meaning it will maintain your portfolio as a whole and prevent you from taking wrong decisions because you won't panic seeing your portfolio hence it is said to always invest in defensive stocks.
I am not providing any buying or selling recommendation For example, during COVID, two sectors were the most defensive named Pharma and IT. The whole market was down, other sectors like hotel industry were deeply impacted but these played as defensive sectors So you will have to research and see which sectors can be defensive which can be beneficial
The fourth pointer is that you need to keep your portfolio simple during bear runs and be invested in good stocks during these times too because many people come out with predictions saying the market will go down to 13000 or 10000, you have to keep your investments intact Keep your investment philosophy simple and stay away from these people and you will be able to make good returns.
The next is the time horizon. It is said that you should invest for long term and is suggested to invest a minimum of 5 years and more in equity. As a whole after 5 years the market would be up, but in between it will go up and down and you have to sideline that and think of long-term benefits and potential of the company you have invested in. and if you keep all these points in mind, you will surely make returns in the long run.
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