Bears tightened their grip on Dalal Street and have wiped out more than Rs 29 lakh crore in investor wealth since early February. The Russian attack on Ukraine looks set to be fierce not only for Moscow but also for global growth, with an increasing likelihood that the US and its European allies will ban Russian oil and natural gas without harming global supplies. The news has pushed the price of crude oil to a 13-year high, a major concern for emerging markets such as India, which still imports more than 80 percent of its oil needs and has sent Indian markets into a panic. .
However, for those who have been in the stock market for less than two years, the massive one-way price drop over the past seven sessions would have come as a shock. The unfortunate truth is that investors tend to pump money into stocks during bull markets – after the stocks have been rising for a while and the news has been hyped, as if nothing could go wrong with the markets. Afraid of missing out, some small individual investors pile up. The same panic and rescue at the slightest hint of a correction.
Don’t panic sell
During market corrections, selling your investments may seem like a good idea. Negative news like a pandemic, asset bubble about to burst, scams revealed, etc. can affect any investor.
However, market experts say that the stock market’s best and worst performing days are often quite close together. This is the main reason why the market timing strategy does not work well for most mainstream investors. The most important thing to remember is that fear leads to panic, especially among amateur investors. This panic often causes investors to sell their investments at low prices during a stock market crash.
Buying the dip is not always wise
As with panic selling during a market crash, it is also important that you do not panic buying during a market crash. Panic buying can be described as a state of mind that prompts you to invest indiscriminately, which can become an obstacle to achieving your current investment goals.
After all, when the markets are falling, it often seems like the best time to invest at reasonable valuations. In such cases, investors often invest in Bluechip stocks or buy Index funds.
However, many investors in such cases forget an important aspect of investing in stocks: their risk appetite. The buying frenzy when markets slump can lead investors to invest in stocks well beyond their actual risk appetite.
Currently, the market is in bearish territory. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said: “Investors should exercise caution. Energy is relatively safe due to high energy prices, metals due to high world prices and export segments due to resilient demand and the depreciation of the rupee.
In the above segments, calibrated purchasing in very small quantities can be considered.”
Do not add fresh stocks
Don’t add new stocks to your portfolio at this time because they seem cheap. Remember that stocks that have fallen 50 percent from their peaks can still be expensive if their financial condition is not in good shape.
Don’t stay invested in sector-specific stocks
During a stock market crash, portfolio diversification is a must. Yes, some stocks can sink forever at some point, but a prudent investor won’t have them, or have them in amounts where it doesn’t matter. However, since new investors may not have enough experience with “what to do” during a crash, they should seek help. Nishit Master, Portfolio Manager, Axis Securities, said: “First-time investors should work with professional advisors and invest in good quality companies available at reasonable tranche valuations. They should also avoid leverage.
Don’t turn your back on the stock market completely
Bicycles are an integral part of the market. When you see both a bull and a bear market, you are finally on your way to becoming a wise investor.
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