The Stock Market in India has crashed in 2020. Many investors who entered the market in the last 5 years are in a state of panic.
The Sensex has gone down from high of 42,273 to 28,288 – as on 19th March 2020.
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Global markets have also come crashing down due to expected economic impact of the dreaded Coronavirus.
Even the 2008 crash wasn’t as brutal in speed as the 2020 crash.
If you’re wondering what you should do, read on:
- If you have money you wouldn’t need for the next 5 years, buy shares!
- Stock prices of some of the biggest companies in India have crashed by 30-40%.
- Consider this period as an opportunity that comes once in a decade.
- Do your analysis over the weekend and buy good companies.
- Sell low-quality companies and build a portfolio of quality stocks.
- Keep an emergency fund which will cover your expenses for the next 1 year. Do not use this money to invest in the stock market.
- Do not sell your portfolio stocks at this time, you will get better prices soon.
- Do not sell your house, gold or break your FD to invest in the stock market.
- Do not take personal loans or withdraw money from credit cards to invest in the stock market.
And finally, be calm.
Most investors have started panicking. Many are selling their shares and getting out of the market.
There is panic and uncertainty all around.
In such situations, if you already have investments in the market – the best thing to do is absolutely nothing. Forget about the market for a few months.
If you are scared to buy, do not buy. But do not sell shares that you already hold.
If you cannot handle the volatility and unpredictable nature of the market, and want to get out, you should wait for a better time to sell your shares.
At the time of writing this article, the Sensex is at levels which we saw in 2015. In the last 5 years, many companies have become larger and stronger. Yet they are available at 2015 valuations.
Many investors would probably look back at this period as a once-in-a-lifetime opportunity provided by the market.
If you have money, accumulate quality companies and hold them for a few years. The market will eventually reward you.
Do not buy in one go. Instead, go slow and be disciplined.
Divide the money you have into 10 parts and invest once every week. If you have 1 lakh, invest 10,000 per week. This way, you will spread your investments across 2.5 months.
By then, we should have more clarity over the COVID19 issue and the market should show signs of recovery.
If COVID19 turns out to be too serious, health should be a bigger concern than the stock market!