As I write this, Indian equity markets are down by roughly 5%. This is undeniably a testing time for equity investors. Here’s my two cents’ worth, on how to survive the market crash:
✅ Don’t Panic
When markets crash sharply, it isn’t uncommon for investors to
panic. However, now is the time to stay calm, and not succumb to the frenzied
environment. Acting in a panic-stricken state is akin to a surefire recipe for
flawed investment decisions. Resist the temptation to sell investments; that
will simply convert a notional loss, into an actual loss. Finally, steer clear
of the temptation to frequently check your portfolio.
✅ Ignore the Soothsayers
Whenever markets crash, certain ‘market experts’ come crawling
out of the woodwork, and make predictions. They will explain in great detail as
to why markets crashed, and even predict what is next in store. Guess what,
none of these soothsayers predicted the current market crash. Neither do they
know what will happen next. They are seeking their 15 minutes of fame. Your
interest will be best served by ignoring them.
✅ Introspection is the Key
Remind yourself that equity investing necessitates a long-term investment horizon.
Remind yourself that market crashes are par for the course in equity investing.
Remind yourself of the goals that you planned to accomplish with your equity investments, be it wealth accumulation, providing for your children’s education, or retirement. Selling investments at this stage will likely hamper those goals.
✅ Don’t Discontinue SIPs
Do not discontinue ongoing investments via the Systematic
Investment Plan (SIP) route. SIPs operate on the concept of
rupee-cost-averaging. A market crash like the present one is when their utility
comes to the fore. An investment at this stage will fetch you more units and
reduce the total investment cost. This could well be the right time to double
down on your investments. Like other items, equities should also be bought when
their prices are low (read crashing).
✅ Keep the Faith
A big part of successful equity investing is being
optimistic—the faith that the future will be better than the present. Now would
be a good time to remind yourself of the robust rally that equity markets
experienced post-Covid lows. If that rally didn’t last forever, neither will
the market crash.
The truth is that no one knows what’s next in store for markets. This is neither the first time that markets have crashed, nor will it be the last time. That’s just the nature of the beast. As investors, we can’t control how markets behave. Instead, we should focus on what we can control—our actions.
Let’s stay calm and resolute. This too shall pass!
