The money markets are seeing a significant sell-off, and the majority of investors, especially retail investors, are facing difficulties due to volatility. While certain analysts predict additional declines, specialists advise adopting a ‘wait and watch’ policy rather than following impulses. In VSRK Capital, we emphasize the importance of learning market trends and taking informed decisions for long-term achievement. A careful approach can allow you to wait for suitable investment opportunities during downturns in the market.
Why is the Current Market Scenario Scary?
World economies are facing pressure from geopolitical tensions, inflation, rising interest rates, and worry over the economic slowdown. The Indian stock market, Sensex and Nifty 50, have seen steep declines. Volatility means ongoing uncertainty, but experts advise against panic selling and making impulsive decisions during such periods.
The ‘Wait and Watch’ Strategy
One of the most priceless advice that professional advisors offer during a sell-off situation in the market is to adopt a ‘wait and watch’ policy. This involves avoiding the urge to act out of emotion and instead opting for watching the progress in the market. By keeping a distance, investors provide themselves with time to examine the situation rationally.
The following are some of the reasons why adopting such a policy is helpful:
Avoid Panic Selling
Panic selling is a normal response during times of market downturn. When the share prices collapse, most investors attempt to offload their portfolios, typically taking losses. These actions are typically done in fear and not logic. Patience and watching will assist investors in avoiding the traps of decisions made under panic.
Understanding Market Cycles
The stock market is cyclical in nature and has its share of downturns in the overall market cycle. Markets have always bounced back after a period of decline in the past. Sticking to a wait-and-watch approach, investors can benefit from the unavoidable period of recovery, which typically comes when least expected.
Returning to Financial Goals
A sell-off in the market provides an opportunity for investors to go back to their financial goals. Rather than fretting over short-term losses, it’s wise to examine your long-term goals and adjust your investment strategy accordingly. If your long-term financial goals don’t change, there could be no need to alter your investment positions.
Assessing Valuations
Market corrections have a tendency to make shares more attractive when they are temporarily underpriced. The ‘wait and watch’ approach allows you to keep an eye out for when certain stocks or sectors turn more appealing with lower valuations. This approach gives you the choice of investing in good quality investments when the market corrects and opportunities arise.
Caution is Key, But Don’t Freeze Your Investments
While the ‘wait and watch’ strategy is recommended, it does not mean that investors should freeze all activities. Instead, use this period to analyze your portfolio and make changes wherever feasible. The following are some steps you can take into account:
Rebalance Your Portfolio
A market sell-off might cause a change in your portfolio’s asset allocation. Certain investments may no longer be suited to your risk tolerance or financial objectives. Make sure to rebalance your portfolio and maintain a diversified portfolio as per your investment goals.
Investment via SIPs
For those who have invested in mutual funds, SIPs are a significant benefit, even in a volatile market. With SIPs, you can invest a small amount of money at regular intervals, missing out on the impact of the market volatility in the long run. If you have no idea what the short-term market is going to look like, to remain invested by continuing with SIPs will cause you to gain from the lows of the market at some point or another.
Research and Stay Informed
Use this time to research potential investment opportunities. Look for sectors or stocks that are undervalued, as well as investment vehicles that can weather volatility. Staying informed ensures that you’re prepared when the market conditions improve.
The Role of Mutual Funds in Volatile Times
Investing in mutual funds provides diversification and expert management, and this minimizes risks during volatile times. Equity funds are structured for long-term growth by experienced fund managers, so don’t worry about short-term volatility. We stress that you have a diversified portfolio in debt, equity, and hybrid funds at VSRK Capital. Regular monitoring of your fund choice ensures that they align with your goals and risk profile.
Conclusion
Drawbacks in the market can be disturbing, yet they also pose potential for those who are prepared. With a ‘wait and watch’ approach, investors can watch through volatility with tolerance and long-term commitment. We at VSRK Capital are at your side during times of chaos with wise approaches to assist you in building a solid portfolio for sustainable growth. Remain cautious, remain aware, and remember that every market cycle is full of potential for expansion.
FAQs
1. Should I diversify further during a market downturn?
Yes, diversification can help lower risks during unstable times. Diversifying your investments in different asset classes such as equity, debt, gold, etc. can reduce the overall impact of a market fall. Diversification also helps you take advantage of potential growth in different sectors, thereby strengthening your portfolio.
2. Can I stop or pause my SIP temporarily?
You can stop or suspend your SIP for the time being, but it is generally advisable to go on with your SIP investments even in phases of market downturn, especially if your financial perspective is long-term. Suspending your SIP might result in you missing out at the time the market recovers. But if your financial condition has declined or you are unable to invest, it’s fine to stop or suspend your SIP, but it’s better to check your long-term strategy before doing this.
