Share market basics – how not to let a volatile market deter youby Pankhudi Dave Head Finance Manager
How to invest in share market? That is one of the first questions new investors ask. Once you figure out how the share market process works, you get comfortable. You continue executing trades – buying and selling shares, mutual funds and other money market instruments and learn to adjust with the market flow on a day-to-day basis. But what happens when the market suddenly crashes. As a new investor, your first instinct is to panic, cut your losses and exit the market. But a seasoned investor knows how to react when the market gets volatile. Here are some tips that new investors must consider in the face of market volatility.
Share market basics – how not to let a volatile market deter you
Here are a few tips to keep in mind when you feel nervous during market fluctuations
Don’t get flustered: Yes, we know that this is easier said than done, but it is crucial that you do not panic. You need to face the fact that there could be possible upward or downward movements in the market and you need to remember that this fluctuation lasts only for the short term. It may take a day or a week, but the market will soon recover. Instead of getting flustered, you should remember that your investments are for the long-term and if possible, you can extend the term to recover your losses, instead of exiting the market impulsively.
Don’t let the price of the stock be your sole focus point: This is a basic mistake that most investors are guilty of making. The most impulsive decisions are taken when the price of the stock is your sole point of focus. Any investor who understands share market basics know that this market is inherently complex and layered. While price appreciation is an important aspect of it, it is not the only thing that should make you buy, sell or hold a stock, especially during a crash. If you are earning good dividends, irrespective of the price of the stock, you should continue holding them. The dividend alone can make up for the falling stock prices.
Review your asset allocation strategy: Another thing to do during a market crash is to concentrate on reviewing your asset-allocation and re-strategizing your investments. Look at the crash as an opportunity to eliminate the non-performing securities from your portfolio and modify your investments. This may seem risky, almost akin to a gamble, but it is a risk you should consider taking. After all, what is share market investment if not a gamble backed by research reports, market analysis and predictions? Seek counsel of your financial advisor and make the necessary changes to your investment portfolio.
Don’t hesitate to invest during the bear market: One of the most important tips you learn about how to invest in stock market is to invest in stocks when the price is low and sell them off upon booking a profit. Falling share prices can prove to be an excellent opportunity to invest in different types of shares.
Invest in blue-chip funds: As your financial advisor will tell you, large blue-chip company stocks are generally less volatile and can also offer stable returns, unlike their mid or small-cap counterparts. When the market begins to recover, you should consider allocating assets towards blue-chip stock investments.
So remember these above mentioned stock market basics if you are tempted to cut losses during volatile periods and remember; this condition is only temporary.
Created on Sep 30th 2019 03:29. Viewed 333 times.
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