3 Impulsive Steps To Avoid When The Market Is Bleeding Red

Stock market downfalls, whether in the form of corrections or at worse, crash, is probably the worst nightmare for any investor, right? Seeing your portfolio of stocks and mutual funds bleed red can fill our minds with the fear of losing our hard-earned money.

And amidst all this chaos, it's the panic-driven impulsive steps that harm your finances in more ways than one. Curious to know? Read on as we explain some of the commonly taken impulsive actions during market downfalls that every investor should avoid.

towardsdatascience

1. Panic selling

This is the worst blunder most of us end up doing when the market is bleeding red. Amidst the chaos that surrounds market corrections or crashes, resisting the obvious is what holds the key! After all, when you follow the crowd blindly, you also fall into the same hole as them, right? So, instead of giving in to the urge of panic selling, you should in fact turn this into an opportunity to buy quality stocks and mutual funds at low prices and NAVs, respectively.

And always remember, history has been a witness that the market has always recovered from both corrections and crashes, with the most recent example being the stock market crash of March 2020, wherein NIFTY 50 had crashed to almost the 7,500 mark and now within about 1.5 years, you can see the market currently soaring high, like NIFTY 50 hovering around 17,000 mark. This in itself has been an example of how the market bounces back, and that too strongly in this case. Hence, it's all about acting with patience and prudence, instead of blindly doing what everyone else is doing!

Also Read: Why Stock Market Downfalls Are Actually A Buying Opportunity

2. Stopping ongoing SIPs

Similar to the obvious urge of resorting to panic selling of your stocks or mutual funds, it's equally important to resist the urge to pause or stop your ongoing SIPs. Instead of getting overwhelmed by the emotion of fear, just stay calm and continue your SIPs during the market downtrend and bearish phases, as this allows you to purchase more mutual fund units at lower NAVs, which translates into lower average investment cost. And when the market bounces back later, itĄ¯s in fact these continued SIP investments that will help in creating a bigger corpus and even help you reach the set financial goals sooner than expected!

3. Compromising on your liquidity when buying the dip

While it's a smart move to turn market downfalls into opportunities to buy stocks and mutual funds at attractive valuations, one thing to ensure when doing so is to never compromise on your liquidity. Try avoiding the urge to invest your entire surplus or savings in the bid to buy the dip. This is because, in case any unforeseen financial exigency or shortfalls crops up during this period of market downfall, letting go of your entire liquidity can force you to either redeem your equity investments at a loss or take expensive loans to deal with such monetary requirements, and both these routes have their respective adverse impacts on your financial life, don't they?

Also Read: Things To Know Before Investing In Equities Now That Markets Are Soaring

For more of such interesting financial content, click here.

Click here to download CRED