Global stock markets have been sliding to new lows as the fear of recession is gripping the investor’s community. Since, China and US are big markets and any corrections in these markets create an impact on the Indian markets as well. The start of 2016 had already been negative and fearful for the Indian stock markets, as well so, how will you plan your strategy during the time of this global turmoil; let us understand:
Is this the time to review your investment portfolio?
Ideally, investors should not look at stock prices and markets on a daily basis and should stay away from the vagaries of markets movements. As long as you’ve paid a good bargain price and the company you’ve invested in hasn’t changed dramatically, there is no need to worry.
Should you invest now?
Though, it may take some time for the markets to stabilize but if you are sitting on cash or have invested surplus money in FDs or other fixed instruments then you should surely take this opportunity & start investing at regular intervals. The key is to deploy your money gradually in the market via mutual funds or direct equities.
Don’t miss the rally, which will come after market correction!
It has been seen earlier that whenever the markets have corrected beyond a reasonable valuations and more because of external factors, it had always provided a great opportunity for long term wealth creation, I would call it a blessing in disguise for investors to make money and one should not miss the rally, which normally comes after every big correction.
What about existing investors, whose valuation is in red?
As mentioned above, as long as the stocks or mutual funds you’ve invested in have not changed dramatically and it is a part of your long term financial planning then there is no need to worry at all. In fact you should sit tight and invest more to average out and use the next few months market volatility for investment by accumulating more units of stocks or mutual funds (SIPs) planned carefully.
Analogy: Baby & SIP!
I have recently come across a good analogy, which compares mutual funds SIPs/stock, market investments to a baby, let us understand.
Q.1 Can we expect a baby to crawl immediately after a birth?
The answer is; NO, isn’t it? Similarly we should also not expect our newly started SIPs, Mutual funds & equity investments to start giving returns from day one. Your investments will crawl in due course of time and then start running gradually to create long term wealth for you, the key is to be alert and vigil and let it grow on its own.
Q.2 What do you do when baby cries?
When they cries, mom usually feeds them and similarly when Sensex or Nifty cries and chips are down; we should also feed money in to it. Let us give time to our investments and it will eventually grow.
Expect some tough times ahead for the stock market across the globe but I strongly feel that this is possibly the huge wealth creation opportunity lying in front of us and we all should take advantage of the current situation. So, let us not miss the bus.
Stay alert; stay smart. Happy Investing!