Coronavirus continues to have a crushing impact on the financial markets. Yesterday, Nifty dropped around 1100 points, and Sensex dropped almost 4000 points in a single day.
In percentage terms, the market contraction was around 13% on both the indexes. Yesterday's performance made the Indian financial markets the worst-performing in the world. Financial markets around the world have been witnessing record lows.
However all the markets except the Indian financial markets have seen single-digit drops. India is the only market, as of now, to see a double-digit drop. Needless to say, these are scary times for a lot of investors. Aise crisis ke waqt kaafi investors apne portfolio ko question karte hain. They wonder if they made the right choices over the years.
All the investors are thinking right now ki aise crisis se guzarne ka best tarika konsa hai? some people are advising investors to play dead. Playing dead is a strategy in which you do not respond to a crisis at all. You let your investment portfolio sit the way it was sitting before. The market will inevitably recover and then you can see your portfolio grow again.
Playing dead might be a good strategy for certain young investors who can afford to take losses for some time. However, this strategy is not right for every single investor. Therefore, in this podcast, we will discover 5 additional steps that investors of all age groups can take to safeguard their portfolios in these unprecedented times.
Step 1: Recognise the wisdom of staying invested.
Investors that do not move out of their positions in a bear market are the first ones to recover when the market rebounds. And the market inevitably rebounds. 2008 ke recession ka aur 2000 ke recession ka data bhi yahi batata hai. Har roj, record breaking dips dekhkar darr lag sakta hai. Par iss darr ko rationally process karna chahiye. If you move out of your positions right now, you will be unable to tell what is the right time to move back into some positions.
This brings us to the second step that you can take to safeguard your portfolio.
In a bear market, people try to time the market perfectly. That is, they wait for the prices to hit rock bottom and then they try to take on new positions.
The problem with this strategy is that rock button kya hai vo ham predict nahin kar sakte. Only the people living in the future will look back on the crisis and realise what the rock bottom was. The people who are living through the crisis can't tell with pinpoint accuracy that prices bottom out ho gaye hain. If you think that prices bottom out ho gaye hain, and then you take on new positions, it is still possible that the prices might fall even further. Because of this unpredictability, you might take on new holdings too late.
And if you take on new holdings too late, you will not be able to fully benefit from the recovery swing. Therefore, financial experts advise investors to stay invested to be able to benefit the most when the stock market goes up.
Another smart step to take in this period of decreasing stock market returns is to not bet on new players. New players do not have the cash buffers that older and more established companies enjoy. In times of such a crisis, new players are at much greater risk.
Yah baat sahi hai ki nayi companies ka growth potential kafi zyada hota hai. But do keep in mind that stock markets and the economies all over the world are currently shrinking.
Instead of taking bets on new companies, it is wiser to stay invested in older companies. The fact is that older companies are likely to have experienced such recessions before. They are more likely to have a game plan in place.
They are also the first ones to gain back their losses when the market finally turns around.
Therefore bear market mein conservative positions Lene mein hi chaturai hai.
Here is one more step that can shield your investment portfolio in times of such a chaos. That step is to develop sector-specific intelligence. A good exercise right now for all traders would be to look at how different sectors are reacting differently to the corona virus pandemic.
Here is a good question to ask: why are certain companies and sectors performing worse than others? In fact, there are companies that are hitting their 52-week highs. How can that be possible? There is an answer to each of these questions, and we might even release new podcasts in the future to answer such questions. But the fundamental reason is that different companies have varying levels of resilience.
Certain pharmaceutical companies can expect to have their market share increase in times of a health crisis like this one. Developing such sector-specific intelligence can lead to smarter investment choices in the future.
The final step that you can take, is to remember that investment is a long term game. The longer you hold onto your investments, especially in mutual funds, the greater will be the rewards that you will reap.
Mutual funds mein dekha Gaya hai that there is huge gulf between the returns enjoyed by people who hold on to their investments for 5 years and people who hold onto their investments for 7 to 8 years. Cashing out just before you are about to make substantially greater returns is not an intelligent decision.
चलिए, एंजेल वन की तरफ से आपको आज के अलविदा. Apne aur apni family ka dhyan rakhiye. Apni holdings ka bhi dhyan rakhiyega.
Aur ये podcast शेयर करना ना भूलियेगा - याद रखियेगा की ज्ञान बाटने से बढ़ता है । और फिर अंत में तोह financial markets एक ऐसी university है जिसमे कोई professor नहीं, सब students ही है ।