There are two things certain about the markets. First, it will continue to rise in the long run. Second, the rise will never be in a straight line – the markets will fall before rising again. One of the best stock advisory would be to learn to make the most of falling markets.
Investors tend to panic in falling markets – they don’t act, or if they do, they react the opposite of what they should. If you are one of those – you should get in touch with top SEBI-registered investment advisors and seek guidance so you can sail through tough times. We will mention some tips if you want to do it on your own.
Tips to make the most of falling markets
In 2022, the major indices have not given any significant gains to investors. We have had many scenarios where the market fell considerably. Below are some things every investor must do to make the most of the falling market:
Create emergency equity fund: You may have created emergency funds under your financial planning. You must also create an equity investment emergency fund. Keep 2-5% of your savings in the fund and use it during a falling market. It allows you to make additional investments in the market (and lower your average cost) without disturbing your monthly budget.
Continue to SIPs in stocks: One of the biggest mistakes investors make in the stock market is that they stop their SIPs in the falling market. It is because of a lack of knowledge and because they don’t understand the rupee-cost averaging. Please don’t stop your SIP. Instead, if possible, try to increase it. If you have additional capital in your bank account, increase your SIP and spread your investment over 3 to 6 months at least. Here is a thing you need to understand – the more you invest in the downtrend, the lower your average cost becomes and the higher your returns get when the market moves in the uptrend.
Invest based on needs: The stocks may be available at a lower price in the down market. However, don’t buy stocks for this reason. Best advisors for stock market will tell you that you must always focus on long-term plans and priorities. You must research and narrow down to investment opportunities that can give you maximum returns in your investment period as per your risk profile.
Well-diversified portfolio: You may make the most of the falling market in the long term only if you keep a diversified portfolio. Try and buy stocks from different sectors and industries. If bank stocks are down, it does not mean you will put all your investment in banking stocks. Always, keep asset allocation in mind.
Make long-term investments: If your investment horizon is short, you should avoid investing in the down market. You invest (or make a larger investment) in the down market so you can make the most on your returns when the market rises. You need to give time to your investments to make that happen. Invest in companies that can survive the downtrend if it lasts long and come back stronger in the uptrend. If you cannot do it on your own, look for the best advisor for the share market.
Understand the risk of investing in the falling market
With the above knowledge, you may feel that you are ready to invest in the next falling market. However, before you do that, please understand the risks involved. The best stock advisory you can take from this article is – never to invest in any asset until you understand the risk involved.
One of the biggest risks of a falling market is that no one knows where the fall will end. There could be panic selling, and the correction can become a crash. Also, even if the fall stops, no one can tell with surety when the market will rebound. It can take a month, a year, or in some cases, even more.
You may find undervalued stocks in the down market, but it does not mean that they cannot become even more undervalued. Hence, we said to invest for the long term.
Start your investment with Jarvis
To minimize the risk of your equity portfolio and to make the most of both the falling and the rising market (the rising market also has investment opportunities), start your equity investment with an AI-driven platform – Jarvis Invest.