MARKETS ARE FALLING: WILL RECOVERY REQUIRES PATIENCE

Given the recent market crash, concerns regarding the future of your investments are valid. Should you take some action or keep your portfolio undisturbed? What if something else happens and the investments that you have made specifically get affected?

Historical data shows that recoveries from such lows happen every time.

For the sake of explanation, I will take the Nifty 50 Index as the benchmark of the market. Since 6th March 2020, the Nifty 50 index has fallen by over 16% in 10 days but if we see the past history it shows recovery from such lows everytime.

LET’S UNDERSTAND WHATS HAPPEING:

Market Correction is a period in which stock prices fall by more than 20%, Beyond 20% they enter the bear phase. Nifty 50 saw its peak in mid-January 2020, at a value of around 12400; at its current value of around 9200, this is slightly more than 25% fall from peak. 

Hence, it is established that this is a bear market. This is important because it means that the fall in prices can stretch out a lot more. 

What Should You Do With Your Investments Now?

There would be two kinds of thoughts running in your mind at the moment:

• Investors who think that the situation is going to get much worse for a long time and want to redeem their investments
• Investors who think that market volatility is normal and if they hold on, they can make good returns

You should think that were these long-term investments targeted towards achieving a financial goal or you were trying to make a quick profit by timing the market and benefiting from its recent volatility?

Any long-term investor needs to accept the fact that markets will always be volatile. There will be ups and downs; rallies and crashes. However, over the long-term, markets will revive and offer good returns.

Never have the markets been a straight line. Keeping this in mind, long term investors should pay heed to few points during this period.

• Keep the SIPS’s running
• Stay Aligned with your long term objective
• Diversify your portfolio
• Focus on your fundamentals, hold on to your existing investments

What Should Short-Term Investors Do?

Usually, short-term investors focus only on the price of the stock and not the fundamentals of the company. As a short-term investor, you can start reviewing your stocks and mutual fund holdings and check if your investments can bear this storm. If yes, then you might want to consider extending your investment time period to a longer-term.

Successful investors are good decision-makers, and decision making requires you to be patient and pragmatic. With so much panic in the market, it is natural to feel a little overwhelmed and would put you in fear of your decision of holding on to your investments.

However, it is also important that you remember what the initial objective of your portfolio was. If you have doubts, go back to the drawing board, reassess your portfolio, financial situation, risk tolerance by your financial expert and then make a decision.

You can use GIIS Financial tools or Our Android App  for Investment, tracking and Asset allocation planning. 

*Mutual Fund Investments are subject to market risk, read all scheme related documents carefully.

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