Due to the fall in the stock market for some time, the value of the portfolio of most retail investors has decreased. At such a time, it is not wise to panic and exit the market or stop investing. Historical data shows that the longer you stay invested, the greater the possibility of strong returns.
Smart investors continue to invest regularly even during market fluctuations. Continuing to invest regularly, SIP etc. means that when the market is falling, you pay less money to buy shares or mutual fund units.
You get more value for them when the market goes up. Unless you are in dire need of money to meet the essential expenses of life, it is not right to sell investments at a loss.
Let us understand how to avoid huge losses even during periods of heavy fluctuations through some strategies. Be cautious, disciplined and take advantage of the following tips to move ahead with confidence in today’s volatile scenario…
Tip 1: Focus on fundamentals rather than hearsay
Investments inspired by social media influencers or hearsay stories from the market often disappoint. What to do: Always look at the fundamentals of the company. There are core financial and operational aspects of the business. This includes the company’s financial statements, business model, industry position, management and competitive position. If these are good, you can invest.
Tip 2: Avoid the ‘buy at any price’ trap
Do not buy any stock without knowing whether the valuation is right or not. Asian Paints (down 34.35%) and Tata Motors (down 42%) are clear examples of this. Even though such companies have historically given strong returns, before investing in them, find out whether they can meet the return expectations now or not. Keep in mind: Past performance of a stock or company does not guarantee future returns.
Tip 3: Don’t stop SIPs even in a downtrend
Stopping SIPs because of market downturns is a classic mistake. Equity mutual fund categories (mid-cap, flexi-cap) have historically delivered 20-23% annualised returns over 25 years on a disciplined monthly investment of ₹10,000, which turns into ₹7-10 crores.
Tip 4: Diversification is the most important strategy
Diversify your portfolio by including different asset classes like stocks, mutual funds, gold-silver, real estate. During a boom, something like this: Equity (mutual funds and stocks): 50-70%, Debt (PPF, NPS, bonds): 20-40%, Alternative investments (gold, real estate): 10-20%
Tip 5: Rebalance the portfolio by selling non-essential assets
Remove the asset portfolio that has been in losses for a long time or does not show any possibility of growth soon. Use this amount in safe investments or keep it safe in FDs or overnight funds.
Tip 6: Be patient, this is your biggest asset
The recession in the market does not last long. Dot-com bubble (2000), 9/11 attack, 2008 financial crisis, Covid crash (2020) and Russia-Ukraine war (2022) are examples of this. Meaning disciplined investors always get good returns by being patient.
Tip 7: Learn from real estate, keep long term holding
You do not track the daily fluctuations in the prices of your house or flat. Similarly, for investing in mutual funds and shares, be patient like you are in real estate and avoid monitoring the prices every day.
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