Listen to this article
As many indices in the Indian stock market have dropped by about 10%, investors may be wondering what actions they should consider.
A glance at the Sensex chart over the past year reveals a clear picture of this significant drop.
A 10% drop like this is bound to cause panic, especially among new investors. In such situations, what steps should we take?
Table of Contents:
2. Your Investment Strategy Shouldn’t Rely on FIIs vs DIIs
3. Entering the Equity Market for Long-Term Goals, Not Short-Term Gains
4. The Stock Market Is 10% Down From Its PEAK – But What About Your Portfolio?
5. Why Timing the Market or Following Tactical Strategies Rarely Works
6. Always Believe in “THIS TOO SHALL PASS”
7. Stick to the Basics: The Foundation of Successful Investing
8. We Can Prepare, But We Can’t Predict
9. Never Invest Based on Past Returns
1. None Predicted This!
Who could have predicted this 10% fall with precision? Honestly, I don’t think anyone could. The same holds true for the future. Can anyone truly forecast what will happen in the short to near term in the stock market?
Instead of panicking, focus on reviewing your asset allocation and sticking to your long-term goals. The market will go through ups and downs, but staying disciplined is key to successful investing.
The answer is no. That’s why the first step towards successful wealth creation is to distance yourself from so-called “experts” in the prediction business, what I refer to as the numerologists of the finance world.
Are these so-called experts really contributing to your financial growth? The truth is, they won’t.
2. Your Investment Strategy Shouldn’t Rely on FIIs vs DIIs
When FIIs started withdrawing their money from the Indian market, some proudly touted the strength of DIIs. But, are such discussions really investment strategies, or are they just trading strategies?
Your investment approach should never depend on the decisions of FIIs or DIIs. So, why waste time on these irrelevant debates? Making investment choices based on RBI policies, elections, FII calls, or festivals, doesn’t that sound like noise?
The truth is, such noise only benefits those who create it.
3. Entering the Equity Market for Long-Term Goals, Not Short-Term Gains
Equity is a long-term asset, not meant for short-term goals. So, if your goal is long-term, can you really expect a smooth ride without ups and downs?
These fluctuations are part of the journey. But, do you have a clear idea of how much to allocate to equity and debt for your medium-and long-term goals?
Remember, never invest more than 75% of your money in equities, no matter the length of your goal or your risk appetite. Why risk more than you should?
4. The Stock Market Is 10% Down From Its PEAK – But What About Your Portfolio?
Yes, the equity market might be 10% down from its peak. But here’s a question worth asking: is it your portfolio’s peak that’s being affected? Instead of reacting to market headlines, the first step is to review your portfolio.
Check if your asset allocation deviates from your target by more than 5%. If it exceeds 10%, it may be time to realign your investments.
These are the questions that truly matter when managing your investments effectively.
5. Why Timing the Market or Following Tactical Strategies Rarely Works
Some investors believe they can outsmart the market by withdrawing funds during a downturn, thinking they’ll re-enter once the fall is over. But let’s be honest, Can anyone truly predict the future of the market with certainty?
Trying to time the market is risky and rarely successful. It’s better to stick with your investment strategy and asset allocation, ensuring consistency rather than reacting impulsively.
Instead, isn’t it wiser to stick to your asset allocation and continue investing as planned?
Let this be your guiding principle: consistency over speculation. After all, disciplined investing, not impulsive tactics, is the real key to long-term success.
6. Always Believe in “THIS TOO SHALL PASS”
Bull runs, bear runs, and sideways movements, aren’t these just part of every equity investor’s journey? That’s why believing in the timeless mantra, “THIS TOO SHALL PASS,” is so important.
How long will it last, and how extreme will the swings be? Even the most informed minds, or higher powers, don’t have those answers. So, why get swayed by market noise?
Stay grounded and focus on what truly matters: your long-term investment strategy.
7. Stick to the Basics: The Foundation of Successful Investing
Are you defining your goals, ensuring proper asset allocation, and investing consistently? These are the fundamentals that keep your financial plan on track. Market noise and sensational news are inevitable, but do they really have to derail your focus?
If you’re investing without these basics in place, isn’t it natural to feel uncertain? Yet, the solution lies within your control, not in waiting for the market to deliver short-term good news.
Hoping for quick fixes, Isn’t that just another way of trying to time the market? Stay disciplined, and let the basics guide your decisions.
8. We Can Prepare, But We Can’t Predict
Do we know when the market will fall? How deep it will go? Or how long it will take to recover? The truth is, no one does. So, isn’t it wiser to focus on preparation rather than prediction?
The best course of action is to prepare yourself for such fluctuations through proper asset allocation. And shouldn’t equity investments always align with your long-term goals? Preparing thoughtfully is the only control we have; predicting the unpredictable simply isn’t an option.
9. Never Invest Based on Past Returns
Have you invested based on the market returns from 2020 to 2024 and expect the same in the future? If so, isn’t that a mistake on your part, not the market’s? Shouldn’t you be realistic in your return expectations and prepare for the inevitable ups and downs?
Equity isn’t a machine that churns out consistent 12%, 15%, or 20% returns. Instead, with its inherent volatility, it can deliver inflation-adjusted returns over the long term.
Final Takeaway
Stay Calm, Avoid Panic, Review Your Asset Allocation, and Stick to the Basics – These Are Your Key Mantras.
Leave a Reply