The COVID-19 pandemic has just launched a new avatar, the Omicron, which has become the driving force for the third wave. The market is currently overshadowed by uncertainty and fear of losing profits in the potentially crippling events caused by the third wave. Here are some thoughtful tips for handling your stock investment as the stock market goes through a correction phase, Money Control reports.
Fundamentally strong stocks
According to Rahul Jain, president, personal wealth, Edelweiss Wealth Management, even the fundamentally strong stocks take a beating during correction mode. However, it is recommended to stick with these high-quality stocks because, despite a beating, such stocks eventually bounce back and add value to your capital. Adding these high-quality stocks is a smart move, as such fundamentally strong stocks are available at attractive valuations in such times.
Avoid impulsiveness and spasmodic reactions
Patience is key, and it’s what analysts recommend when making decisions about staying in the game or taking an exit route. The fact that headwinds in the economy led the markets to soar to a new high in 2021. Panic and decision making could turn the fictitious losses into actual losses.
Well-balanced diversification across your stocks is a viable net that will save and preserve your profits in the event of a downturn. One can increase the potential for wealth creation by holding an intelligent mix of large, mid and small cap stocks. Here an intelligent mix is the one where the diversification leans towards large cap stocks, as mid and small caps are more volatile and risk sensitive.
Avoid lump-sum investments
It is wise to follow a Systematic Investment Plan (SIP) or diversify your investments as lump sum investments are more prone to losses. Aside from capital losses, it also leads to a lagging perception of investment experience leading to an unfortunate shutdown of your stock investment. SIPs keep you engaged in the market through various instruments, resulting in the accumulation of more units even during a bear market.
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