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3 things to consider while investing in a falling market

How to become a smart investor who knows how to deal with the falling market?

Friday January 24, 2020 10:13 PM, ummid.com News Network

Investment Tips

When faced with fear, you feel prompted to do whatever it takes to stay safe. The same is true when you look towards your investments while the market falls unexpectedly. As an investor, it is natural that you fear potential deprivation of investment values. Irrespective of the financial instruments you have chosen, market volatility has its say.

Consider this example –

You have invested one lakh rupees in a mutual fund scheme. A few months later, you found that your investment value has fallen to ninety thousand rupees. In such a situation, the first thought that comes to your mind is to exit the scheme and liquidate your investment. You may even feel doubtful about the phrase which says, ‘Mutual funds Sahi Hai.’ Doing this may seem like the only way out to prevent further depreciation in your investment value. However, it’s a bad idea to liquidate your investment at this stage.

As an investor, it is crucial for you to know that markets are cyclical. What falls today is most likely to regain its value in the future. If you invested money to support your life goals, sudden liquidation would prevent you from fulfilling them.

You might be wondering –

“How to become a smart investor who knows how to deal with the falling market?”

What’s most important is that you make up your mind, act cautiously and prevent the primitive emotion of fear from taking over your actions. With time, you get to realize that ‘Mutual Funds Sahi Hai,’ irrespective of market conditions.

Here is what you should do while witnessing a falling market:

1. Don’t Panic

There’s an old saying – Haste makes waste.

If you react too quickly, you are more prone to making mistakes. No market condition, good or bad, stays forever. Just like every new day that follows the night, things become better soon, and the market will pick up again. During tough times, it is crucial not to panic as it can lead you to make mistakes that you will regret later. Wait for some time to allow the market to settle before you react to the situation. For your financial planning, ‘Mutual Funds Sahi Hai’.

2. Avoid Tracking Market Indices Frequently

During a falling market, people might become obsessed with tracking market conditions multiple times a day. Let’s say you have invested in equity schemes. Having your eyes fixed on every fall in price index may not help you in any way. Instead, it will add to your worries. Equity investments give better returns over the long term, which requires you to be patient during unstable market conditions.

Also, fall of price indices can be the result of depreciation of overvalued stocks. Make sure you check other crucial factors before you plan to exit from the chosen investment schemes.

3. Maintain Focus on Your Financial Goals

You might have often heard investors saying, ‘Mutual Funds Sahi Hai’ concerning the returns they receive with their investments. One reason why they get significant gains is that they maintain utmost focus on their monetary goals.

Exiting your investments during falling market conditions returns your capital. However, it will prevent you from earning gains in case the market picks up just after your exit decision. Chances are high that the money you receive back gets utilized for unplanned needs. If you have invested in ELSS, you will lose the tax benefits as well. So, it is crucial that you focus more on getting high returns in the long run than making impulsive exit decisions.

When the going gets tough and you fear losing your capital, condition your mind to think about potential future gains. If you find it challenging to study the market, look for professional help from financial advisors like FinEdge. You need to keep your mind in control to become a successful investor in the long run to agree that ‘Mutual Funds Sahi Hai.’

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