Watch and wait, exit or jump right in? I know exactly where the market is heading!

The situation in the market is unsettling and it’s a nerve-wracking time to be an investor right now, as the stock market continues to slide. The Nifty50 is down more than 17% over the last few months.

Downturns like these can be daunting and as an investor I am worried. I am questioning myself, my logic and my reasoning as I have seen my net worth being eroded by a significant sum in the past few months.  Even as a seasoned investor, I am tempted to stop investing altogether or even pull my money out of the market. But is that the right move?

Hence in times like this I ask myself:

Can I predict where the market will go down to and how long will it take to recover?

I know for a fact that no one can predict the lowest point of the market nor how long it is going to take for the markets to recover, Even the best experts cannot predict with any accuracy how the market will perform. Case in point: In the early stages of the COVID-19 pandemic, many experts believed we would experience a prolonged bear market. In reality, though, after a brief crash, the market went on to see two of its best years in history.

Should I be changing my investment pattern?

Most of my investments in the markets are long term in nature. They were made with a certain goal in mind. Again my reasonable self says that with such good companies trading at such reasonable valuations, it might be a good time to invest some more in equities. I will definitely not stop my SIPs as I know they will be buying units at very low prices which will boost my returns when markets recover. Infact, it is a better idea to invest some additional funds and benefit from the lower valuations.

Should I be worried about the safety of my investments / corpus and shift to FDs?

I have my assets diversified in Debt funds, Bank FDs, PF, PPF, real estate etc. I have my emergency funds available in my accounts. Then why should I be driven by fear and not see this as an opportunity? Let’s be driven by IQ rather than EQ. This is the time to stick to the basics and have my asset allocation in place.

How do I protect my money?

The answer is simpler than one might think: do nothing.

While it may sound counterintuitive, simply holding my investments and waiting it out is often the best way to survive periods of volatility without losing money.

During market downturns, my portfolio could lose value in the short term. However, I don’t actually lose anything unless I sell. By holding my investments until stock prices eventually recover, I can ride out the storm without losing anything.

When I maintain a long-term outlook, market downturns and crashes aren’t as intimidating. Even the most severe crashes are only temporary, and the market will recover eventually. By keeping my focus on the future and holding my investments despite volatility, I can ensure I am doing everything possible to keep my money safe.

How to take advantage of this situation?

Warren Buffet often says “be fearful when others are greedy and be greedy when others are fearful”

This is a time when there is panic & fear in the market and such instances are usually great for investing (be greedy). As an investor, I hope the market rises immediately. But I’m also prepared for further declines. I am buying stocks and Mutual Funds a little at a time, at key psychological levels, as I find the chances of rewards much greater than the risks involved. 

This approach makes sense for long term investments 3 years+.

Remember correction is temporary and growth is permanent. 

The start of 2022 has already given us a reminder of how painful a down market can be. And the returns generated after each stock market crash demonstrate how lucrative stock market investing can be. Nobody really knows where the market is heading.

So, are going to wait and watch? Exit? Or invest more!