Big Fall in Stock Market what should investors to do ??
Big fall in stock market?? What should investors to do. First we should understand why stock market falls and the reasons behind it. Stock market is all about the country’s economy. It may affected by several reasons such as low gdp growth, proper monsoon, Industrial data, banking, financial, geographical and many more will impact the market.
Stock market is the very sensitive, it reacts to the every condition that’s going around the world. We have seen Corona virus impact and many more in the past, But every time market tries to recover from that condition, this is the markets behaviour. Every time it should happens.
You can also observes the below image to understand how market recovered in recent falls. Investors might get panic for every small correction because there is several reasons such as lack of knowledge, severe panic ness, the real money involved going to red and many more reasons will lead the investor to sell the stocks. So what should investor to do in market corrections. It should be applicable for every fall in the market. Follow the below basic rules to get protected by yourself in the stock market.
7 Key points to be followed when Big fall in stock market:
1. Remove / Sell Junk Stocks
The junk stock which raises continuously along with upper ciucuits only because of the stock price is low and only based on assumptions though the stocks doesn’t have proper business, weak fundamentals and weak financials or they might went for Bankruptcy. First identify these type of stocks in your portfolio and remove/sell immediately as they kill or vanish your money at any point of time when big fall in stock market happens.
2. Average Quality Stocks
The quality stock which having proper business, Strong management, Steady growth in quarterly results, demand for their products or services in the market and strong fundamentals is called as Quality stock. These quality stocks may be correct along with the market correction as well they will recover along with the market. Identify these type of stocks in your portfolio and try to average them, so that you will get a better price than previous buy price.
3. Invest in Multiple Parts
As nobody in the world can time the market where exactly market can raise or fall. So we need to follow thumb rule of investing that is invest in multiple parts. For example if you have 1 lakh rupees with you then divide the money into four or five parts, then start investing with one part inselected quality stocks. Then if you found more 10 – 15% fall in market again you need to invest or average the stocs with the secont part of the money that you divided. You should continue this even market raises further.
4. Don’t invest your Emergency Fund
This is a strict rule to be followed by the investors because if wr couldn’t make proper returns then the financial stability will be on toss. It impacts severely as our family depends on us. So we should be very careful while taking this type of investment decisions. Never take loan to invest, don’t remove Fixed deposit which may needs in near term.
5. Don’t invest in Low price Junk stocks
You may find too many companies that are trading in low prices, but you should analyse them whether they are quality stocks or not. You can invest in the quality stock even they are trading at higher prices as they can grow and they can generate multiple returns. So always choose a quality stock with low or high price. Here you need to understand price is not matter the strength of the stock is matters.
6. Do your own Research
Before investing into any stock please do your own research. Don’t blindly follow big analysts or else someone. Don’t invest in any stock as someone invested or some big personality invested because you don’t know their calculations, their risk appetite. At some place they may exit but you don’t know the point where to exit. So try to analyse the stock by own, there is lot of data available online, spend some quality time to learn parameters that might help to select the quality stock.
7. Top up your SIP/Lumpsum of MF
If you are a Mutual Fund investor then try to top up your SIP or Lumpsum in the market corrections. So that you may get better NAV than your buying price and your returns also average out. Mutual fund investor also need to observe the market so that they would able to find the opportunities to get benefited from the market correction.
In addition to these 10 important points, i would like to add few psychological points here. Which makes you more strong and ability to deal with falling markets. So these psychology points are very much important than the technical knowledge and other points. The below ae the 3 most important psychological points.
3 important psychological points when Big fall in stock market:
- Not only in falling markets but also when market is going against your direction, protecting your capital is most important than earning or making profits. Because if you are a trader or investor, the capital is very much important to trade or invest again, when it’s moving in right direction or as per your analysis. In the secondary markets, capital is the primary, whether you are professional trader or the beginner. Keep this point in your mind always and forever to stay in the markets.
- Along with your capital, learning is most important than earning money or profits. So first try to learn then build your strategies to make money. Never depend on others to trade or invest in the markets. You should analyse the stocks to invest or trend to trade. Through this way only you’ll have the conviction to hold the trade or stock.
- Don’t get attached with loss making stocks or trades, which makes you to loss more money. Always maintain a strict stoploss as per your analysis and as per your risk appetite. Else you will lose more money than the making money. So always keep these points in your mind always and forever to stay alive in the secondary markets.
If you follow these points strictly, may be you are not going to make money, but you will be stay alive in the markets and the experience you gain and the time you watched the market and the behavior of the market you understand in this time, will definitely pay you a lot in the long run, which you can’t even imagine.
Conclusion :
Every Investor should follow the minimum basic rules in the big fall in stock market corrections. So that we will able to handle those situations. We need to see the market correction as an opportunity. Begore investing into any stock firstly you should analyse and understand the business, if do so you will get conviction on that particular stock. So may not get fear in corrections.
Already we’ve been discussed the 10 golden rules for Intraday Trading. Click Here to check out the best points of intraday trading.
Disclaimer : Before investing into any stock try to analyze on your own else take a decision from your financial advisor. All stock suggestions and information providing is purely based on my personal view..