The majority of indices in the Indian Stock Market have experienced a decline of approximately 10%. In light of this, what actions should investors consider taking?
If we look at the Nifty 50 Chart for one year chart, then we can visualize this drop clearly.
Obviously such a 10% fall means investors will panic especially if they are new investors. In such a situation what action do we have to take?
Stock Market Drops 10% From Its High – What Should We Do?
# None were aware of this!!
Show me one person who precisely predicted this 10% fall. In my view NONE. The same applies to our future too. No one can predict what will happen in the short term to the near term in the stock market. Hence, the first step to follow is to stay away from experts in the PREDICTION business (which I call numerologists of the finance industry). None of such experts will add value to your wealth creation journey.
# Your investment strategy should not be based on FIIs Vs DIIs investment
When the FIIs started pulling their money from the Indian market few proudly defended DIIs power. Such discussions or strategies are not investment strategies but trading strategies. Your investment strategy must not depend on such DIIs or FIIs investment decisions. Hence, avoid all such useless discussions. Making investment decisions based on RBI policy, elections, FII investment calls, or based on festivals are kind of NOISE that will actually benefit those who will create such NOISE.
# You are entering to equity market not for your short-term goals but for long-term goals
Equity asset is meant for long-term goals but not for short-term goals. Hence, if your goal is long-term, then such ups and downs are common during your investment journey. Also, you must have clarity about how much % of your money you are allocating to equity and debt for your medium-term and long-term goals. NEVER INVEST more than 75% of your money in the equity market (no matter how long the goal is and whatever may be your risk appetite).
# Stock Market is 10% down from its PEAK not from YOUR PORTFOLIO PEAK
The equity market is down by 10% from its PEAK but not from your portfolio values peak. Hence, instead of worrying about such news, the first task to do is to check your portfolio. If your asset allocation is intact or the deviation is just around less than 5%, then nothing to worry about. If it is more than 10% deviated from the defined asset allocation then only
# Never try to time the market or follow the tactical strategies
Few try to withdraw the money with the thinking that once the fall is over then they can re-enter. However, as I mentioned above, NONE are aware of the future. Hence, don’t try to do such strategies. Instead, sticking to asset allocation and continuing investing, as usual, must be your MANTRA. It is like “Catching the falling knife”. Hence, avoid such strategies.
# Always believe in “THIS TOO SHALL PASS”
Whether it’s a bull run, bear run, or sideways, all these are part and parcel of equity investors. Hence, always believe in the theory of “THIS TOO SHALL PASS”. How long it will take and how much the up and down is unknown to even god too. Hence, don’t believe in such noise.
# Stick to BASICS
Stick to investment basics like defining goals, doing proper asset allocation, and investing regularly. Such news and noise are part and parcel of the game. If you are investing without following these basics, then obviously you have to worry. But the solution to such worrying is with you only not from the market. Hence, hoping that some good news will come in the short term is again trying to time the market.
# We can just PREPARE but can’t PREDICT
We don’t know when the market will fall, how deep it will be, and how long it will take time to come back. Hence, the only action we have to do at our level is preparing ourselves for such falls with proper asset allocation and entering into equity only for our long-term goals.
# Never invest based on past returns
If you have invested based on the market returns of 2020 to 2024 and expecting the same for the future, then obviously it is YOUR FAULT but not the market’s fault. You must be realistic in return expectations and also must be prepared yourself for such incidents. Equity does not mean the consistent 12%, 15%, or 20% returns generating machine. Instead, with volatility as its basic nature, it can generate inflation-adjusted returns over the long term.
Conclusion – Be calm…don’t panic…check your own asset allocation…Stick to Basic are the MANTRAS.
