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5 Steps to manage panic situations in investing

  • Mar 23, 2020

The stock market is  in a free fall. While powers that would take steps to reduce the impact of the illness among individuals and communities, it is time to take urgent steps to avoid setting your portfolio on fire.

First, don't panic. It can help to look at the facts and understand your investments for the long-term. You may find it painful to watch the value of your holdings going down, but there is more to investing than just the day-to-day swings of the stock market.

Putting things into the right perspective can help position your portfolio for long-term success. So, while you keep your emotions at bay, take these five steps to manage your investments in today's unsettling environment.

  1. 1. Stay invested. The most crucial step in navigating the current scenario is to stay invested. Even as a steep correction can be a wake-up call to review your investments, you could compromise the possibility of generating long-term wealth if you pull out of your finances at this stage. In short, you could potentially miss out on big rallies; hence, avoid panic-selling. Successful investors throughout history realized that building long-term wealth called for the ability to control their emotions and avoiding abandoning their investment plan.
  2. 2. Continue your SIP contributions. Investing a fixed sum steadily into mutual funds could benefit you over a long-term period. This means, when markets are low, you can get the opportunity of buying more units at a low cost, and can possibly gain from reasonable yields when the markets rise. This strategy, known as rupee-cost averaging, can help you achieve decent yields in the long run.
  3. 3. Benefit from compound interest. The amount of time you spend in the market is more crucial than timing the market. By ensuring you stick to a disciplined investment plan, you will be able to take advantage of compound interest, that is earning interest on the interest you receive from your investments.
  4. 4. Diversification is key. An ideal way to achieve diversification, as well as asset allocation, is through mutual funds. By making systematic investments in mutual funds, you can easily reap the benefit of diversification. Since mutual funds already have diverse holdings, when you invest in them, it spreads your risk across different types of assets.
  5. 5. Think long-term. Historically, markets have always bounced back time and again. And while financial experts consider that the current downturn may continue for some time, most believe that markets will recover in the next few months. While recent events may delay your investment growth, the market downturn is not an indicator that the growth of your assets have been derailed.

Takeaways

  • 1. It can help to know that the market has grown despite historical crises and uncertainties over the years.
  • 2. In this regard, you may be more focused on staying invested even when faced with such events.
  • 3. Keep in mind the possibility of upward progress of your investment; this can help you remain positioned and help benefit you from the long-term growth potential of your finances.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

For further information on KYC, List of SEBI registered Mutual Funds and Redressal of Complaints including details about SEBI SCORES portal; visit https://mutualfund.adityabirlacapital.com/investor-education/education/kyc-and-redressal

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