5 Things to Do When Stock Market Crashes
We all worry about money. It is easy to understand why one would be worried about having little or no money. But, we also worry when we have money. This is especially true if our money is invested in the stock market and there is a market crash. In 2020, during the 1st wave of the COVID-19 pandemic, stock markets crashed dramatically and caught most investors unawares.
While a crash in stock markets or a market correction is impossible to predict, there are various strategies that investors can utilize to minimize its impact on their investment portfolio.
In this blog, we will discuss five ways to cushion the impact of the market crash on your portfolio.
Don’t Sell in a Panic
Whenever the bears wreak havoc on the stock market, you may think of pulling out the money and folding in your losses. However, a bull rally can correct the stock market crashin no time. The stock market has always recovered well, no matter how impactful the crash.
Instead of panic selling, therefore, you should focus on long-term investment. That’s the only way you will reap good rewards.
Ignore the Market Sentiments
Amateur and nervous investors can engage in panic buying and selling during volatile markets. Sadly, their mass panic is palpable. So you may end up doing FOMO investing and losing sight of your investment goals.
It is better to trust your research and the history of stocks at such a time. They can help you navigate the market turmoil far better.
Buy the Dips, But Pick Wisely
This goes without saying, but you should keep some funds handy for shopping during bearish runs. Think of a crash like an end-year sale from your favourite brands.
You can invest in high-performing mutual funds and equities at a reasonable valuation. It is also a good time to buy more from your winning investments. However, do so after due diligence. Keep a list of quality stocks handy. Adding blue-chip or dividend stocks to your portfolio is also a good idea, as they have built time-tested economic moats.
Not Every Company on the Radar Deserves Your Money
If you are going to buy on dips, pay special attention to stock selection. Don’t fall for the market narratives without proof. Look out for factors like EBTIDA, cash flows, capital allocation, valuations, profit made, among others.
You also want to avoid investing in internet-based companies. Or companies having massive commodity influence as they are challenging to work out.
Better to Stay Still
The jitters in the equity market may make you anxious to take some action. However, as history goes, the changes are often short-lived. They are not powerful enough to alter a company’s situation. So you are better off laying low and waiting for the next rally of bulls.
In the world of the stock market, corrections come like seasons. So if you’re new to the scene, we recommend building some bear market strategies using the tips above.
Source: Tata Capital