MARKET IS IN FREE FALL. WHAT TO DO?

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Market is loving the red nowadays (Why on earth my mind is stuck on ‘London Bridge is falling down...falling down’ rhyme? We know whom to blame but can’t risk writing it here. That ‘someone’ reads my blog and I can’t take any chances). Russia’s attack on Ukraine has caused turmoil in the market along with the fear about Fed Rate Hike. So, the question on everyone’s mind (If invested in the Stock Market, of course) is ‘What should you do? Should I pull out all my money?’ The short and sweet answer to this is ‘Nope’. (There, saved you so much time. If you have nothing to do like me then read on.)

The real question here should be ‘What you shouldn’t do in falling market?’ (I am too lazy to change the heading now)

No panic selling

My Father taught me a simple funda. ‘When shopkeepers (It’s a metaphor, people… I am not categorizing Shopkeepers here) start talking about stock prices and start giving stock tips then it’s time to leave the market (Book your profit) and when everyone is panicky and running away from market, it is the time to invest.” Market is volatile. Corrections are bound to happen from time to time. Don’t let it affect you. Block the outside noise. Consider this an opportunity. (If this fall is making you distraught and rattled, you need to check your risk tolerance and make investments accordingly). If you will sell in this market then you will have to book loss. Rather wait and let the low tide pass.

Volatility can be your friend

Falling markets makes me happy. (Do I have no empathy?)  It is the time to stop looking at your portfolio and gather all the cash you have and invest (Am I mad?) in the stock market. Make volatility work in your favour. Many good stocks trade at discount in these times. Previous bear phases (2008-09, March 2020) have proved that such dips provide opportunity to build your portfolios. Take benefit of entering the market at low and increase your investments (Advice for long term investors only). Market will rebound at some point. (Its not possible to time the market. Bear market can continue for a while but Bull market will surely follow). If not comfortable in making new purchases, then just wait it out.

Take small steps

If you plan to make fresh investments, don’t go all in at once. Invest in instalments. You don’t know at what point the market will bottom out (No one knows that). Make gradual and phased investments.

Diversify

This market volatility teaches us that ‘Don’t put all the eggs in one basket’. If you are a short-term investor and in need of a large chunk of money currently and all your money is stuck in stock market then you are in trouble. Stay away from equities if your investment horizon is less than 5 years. Diversify your portfolio. Include debt options for short term investments. Build your ‘Emergency Fund’ if not already done. There will always be a feeling of FOMO (Don’t know this? Do you live under a rock or what?) but don’t let it turn into BFL (I totally made this up. It means ‘Big Fat Loss’). So, let’s toast (with a mocktail of course, I live in a dry state) to the future with ‘all-the-time-in-green’ Sensex. Adios!

                                                                                                       -Foram

Comments

  1. Jigisha8 March 2022 at 23:59

    Very interesting...
    Like to quote Warren Buffett... "Only when the tide goes out do you discover who has been swimming naked"

    ReplyDelete
    Replies
    1. Foram9 March 2022 at 02:27

      Thank you! Gonna use this quote in one of my posts!

      Delete

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