Stock markets and risks go hand inhand. Whether you invest a large sum of money or invest through SIPs, oneshould be prepared to face risks. But, along with risks, there come opportunities. Though all traders and investors invest in the stock market to make gains, sometimes things don’t behave in an expected manner and this is when they face loss. There could be many reasons behind the crashing of stock markets. Many fear the same while many remain prepared to face any such situation.
The most important thing that oneshould keep in mind is that it is the way how we react to a market crashdetermines the fate of the invested amount. So, the best way to do that is to seek the answers of various commonly asked questions by traders and investors during a stock market crash. Even, the best stock broker in India would suggest going this way to stay steady during a market crash.
So, let’s find out the followingcommonly asked questions during a stock market crash.
What is the reason behind the marketcrash? What are the hopes for recovery?
As stock markets are closely relatedto business activities, any kind of interruption to the same tends to affectthe stock market negatively. Take the example of the coronavirus pandemic when the sudden eruption of the virus has forced the government to shut down every business. Though this step was taken to limit the spread of the virus, it disrupted almost every industrial sector from manufacturing to automobiles, marketing, and others. This is just one scenario. Another example could be war which is also known to hamper international trade.
As far as recovery is concerned,there is no set deadline. It depends on the scope of damage caused due to thedisruption and the measures various agencies tool to ensure a faster recovery. As the Indian economy is showing positive signs of recovery due to the steadfast vaccination program, it can be expected that the Indian stock market would be back to its growth path soon.
Was I wrong in choosing the stock? Whymy portfolio suffered losses?
This is possibly the most commonlyasked question. Investors must need to understand that the ongoing market crashbrought the stock indices down by nearly 1/3 rd. When an index goes down, over 95 percent of stocks become susceptible to panic retailing and plummets in terms of price. Though it is great to disapprovingly analyze the investment conclusions, the selection of stocks is not the reason behind any portfolio failures. Considering this, investors with an expanded portfolio would be in an improved position to recuperate from their losses than those with a slanted view in regard to small-caps, or domains that were badly affected such as aviation, hospitality, etc. The bottom line is that except the investor decides to sell, these are considered theoretical losses that can be improved once the markets begin to bounce back. Investors must need to keep themselves away from panic selling and come up with a new strategy to reduce their losses as soon as possible.
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Should I invest in stocks till thetime market is down?
According to all the top 10 stockbrokers in India, this is undoubtedly a favourable time to invest in stocks. Asthe prices are low, bottom-fishing should be avoided. If you want to invest in stocks, make sure that you carry out a detailed fundamental analysis of the stock and invest in the selected ones that have exhibited their performance in adverse situations.
Should I stop by SIP or redeem thefunds?
Discontinuing your SIP could be a bigloss as it tends to give results over the long term of the investment. Discontinuingyour SIP instalments during a market slump is possibly the worst mistake you can make as an investor. It overthrows the extreme purpose of SIPs by opposing the opportunity to accrue more units when prices take a dive.
A downturn is the most perfect timefor SIPs to really work in your flow. SIP investments tend to show betterperformance in a changing market case. As the market hits lows, leading to a reduction in a fund’s NAV (Net Asset Value), you end up buying more units of the stock at a reduced price.
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What are other things I can do incase of a market crash?
The most important thing that alltraders and investors need to keep in mind during the market crash is to avoidpanic selling. As the stock markets plummet, many investors begin selling in order to limit their losses. However, this causes estimated damage into a book loss, making it harder to recover. Investors must need to follow their typical investment plan with small innovations and maintain a long-term horizon.
Conclusion
Traders and investors stay patient incase of a stock market crash as this is an inherent part of market functioning.No matter how much loss you have, the market is bound to regain its lost glory in some time, Stick to your original plan and continue investing in your SIPs in the way you were doing earlier. This would help you limit the damage to a great extent.
