“The equity markets are in a free fall. Stock valuations are dropping limitlessly. I can wait no more. Let me exit before it falls any further.”
Do these thoughts resonate with you? Is your faith in your investments shaking? Do you really feel that it’s now or never?
If your answer is ‘Yes!’, hold on! Else, you might cross the line – from being an investor to becoming a quasi-investor.
The impact on you
So, what is it that really changes when the market falls? Stock valuation, of course. But more than that, changes you psychologically.
- You, who entered the market as an investor, with a clear horizon of 2, 5 or 10 years, and were pretty sure about the stock fundamentals suddenly got influenced by the panic around you and began to respond likewise.
- The adrenaline starts gushing within your bloodstream and you enter into a fight or flight mode- either sell the stock now or there will never be another exit opportunity.
- You stop believing in your own research, fundamentals and instincts and just go with the flow.
But is that what you should do? Suddenly step out of the sturdy shoes of an investor and get into the more flighty footwear of a trader? Or should you wait for the storm to wither and tides to return back to normal so that your ship can once again sail firm and steady.
What should you really do?
Three simple things can make a great difference: –
- Just ask yourself – “Have the fundamentals changed?” Usually, the fundamentals of good stocks will not change at short notice. To reassure yourself, look into them once again. Knowing that the stocks you have will reap good returns over the long term, due to their underlying fundamentals will instantly switch off your panic button and you will be at ease with holding on and waiting. In fact, you might also want to add some more stocks and avail the price-advantage.
- Train your mind– Remind yourself that you are an investor. Revisit your vision and financial objectives. You are not here to lose money due to a periodic bearish run. You are here to invest, stay and take a bigger prize home.
- Hire an advisor – Even though you might be a good reader or understand balance sheets well, what you need most at this time is some good support and moral support. A financial advisor can help you regain confidence and act as a consistent reminder that the markets will bounce back. He will never let you slip from the shoes of an investor into those of a quasi-investor.
Follow the above-mentioned steps and create a win-win situation, irrespective of the markets.