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Rahul Nair, 35 years old, was in a state of panic. He has been on the phone with his Relationship Manager (RM) at Kotak every day since last week because he is afraid of the impact of the Coronavirus on his investments. It’s not because he travelled to China or Italy recently, it’s because the stock market is crashing and his mutual fund portfolio has taken a hit. His RM asked him a couple of questions. “Mr. Nair, do you need the money for some emergency right now?” “No.” “Do you believe the Indian economy is going to stop growing in the next 20 years?” “No.” “Have your financial goals changed in the last one week?” “No.” When Mr. Nair answered these questions, he calmed down. He heard himself and realised that he was very close to throwing away two years of disciplined SIPs because of one week of panic. Basically, he almost his long-term perspective because people around him were panicking.
Mr. Nair’s story is very common today. On March 9, 2020, the BSE Sensex crashed over 2,200 points or over 5.62% by noon because of widespread of the Coronavirus. And you know what? That’s okay. The stock market is volatile. Take a look at the Sensex since 1990.
The Sensex often has deep valleys but after every trough, the market has rebounded stronger than ever. In 30 years, the Sensex has moved from 1,000 points to 35,000 points now. As per historical data, once the Sensex starts recovering, it quickly makes up for lost ground. There is no reason to believe it won’t happen again.
Stick to your game-plan, don’t play the markets’ game
When you see so much panic in the market, it is natural to feel the urge to sell and exit. Don’t. The market is made up of all kinds of people. Sophisticated traders who know when to play the market because people are afraid, traders who want to make a quick buck, and the most vulnerable player, the retail investor (you) who assumes the worst and sells their whole portfolio because of mass hysteria. Don’t get caught in a race to the exit.
Here are a few pointers on what you should do:
Always follow the investment plan that you have prepared despite market volatility. Markets have gone up and down in the past, and they may do so in the future. Do not lose your long term perspective because of market movements.
Mutual fund investments are subject to market risks, read all scheme related documents carefully.
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