Since the very beginning, stock markets have been fluctuating now and then. This is known to be an intrinsic nature of stock markets and depends on several factors both at macro and micro levels. When the market is going up, everybody seems happy as investors get amazing returns on their investments. But what if the market going downwards? Though the short term downside is quite natural but what if the market slumps suddenly. This is something very frightening both for the stockbroker and the investors.
The year 2020 has witnessed some unprecedented events like COVID19 that have impacted the global market in a declining way. Though markets have started some signs of recovery since the announcement of the COVID vaccine, investors have been coming up with some questions that are common during a stock market crash.
So, here are some commonly asked questions that are asked during a stock market crash.
1. Is this market slump temporary or long-term?
This is the most widely posed question by investors to stockbrokers. The answer to this question depends on a number of factors from the ongoing market scenario to scheduled economic reforms by the government.
Anticipating the actual recovery period of the stock markets is hard to find as the world has not seen such a vast level of a pandemic for years. However, staring back at all notable market crashes, this can be a favorable time for investors to reflect on developing a long-term equity portfolio as markets can be expected to recover and recoil sturdily over the next 5-7 years.
2. Did I pick the poor stocks? Why I have been facing losses?
This is another most commonly asked question by investors. Investors must need to understand that the present market crash brought the marquee indices down by nearly 30 percent. When an index goes down, more than 95 per cent of stocks become susceptible to dread selling and plummets in price. While it is feasible to disparagingly examine the investment moves, the selection of stocks is not the main excuse behind the suffered losses. Keeping that in mind, investors with a diversified portfolio would be in a better place to recuperate their losses than those with a tilted view regarding small-caps, or sectors that were the worst-affected such as aviation, hospitality, etc. The bottom line is that unless the investor sells, these are notional losses that can be recovered once the markets start rebounding. According to the top stock brokers in India, Investors should try their best to avoid panic selling and create a new strategy to minimize their losses right now.
3. It is good to buy stock during this downtime?
According to the best stock broker in India, this is a time when investors can choose to buy more stocks. However, it is necessary to invest in those that have strong basics. Just because the prices are at the bottom, they should avoid heavy buying. When it comes to investing in stocks, do make sure that you carry out a detailed fundamental analysis of the company and invest in the ones that have the substance to challenge this unrest.
4. Should I stop my SIP or redeem it?
If you’re investing in SIP, it is advised to continue your SIP payments even when the markets are down. SIPs are of immense help during any volatility as you get more units at low prices and less when the prices go up. If you start now by investing during dips, you will end up collecting more units in the long term. Choices like redeeming mutual funds should be made on the basis of capital requirements and if your investments have been underachieving reliably over a prolonged period, and not on short-term instability as markets improve over time.
5. What is one thing that must be avoided during a market crash?
The gravest mistake that a majority of investors do is panic selling. As the markets nosedive, many investors start selling in an effort to limit their losses. However, this becomes an estimated loss into book damage, making recovery harder. Investors should think about jutting with their initial investment plan with small pinches and uphold a long-term scope.