What after a Stock Market Drop?

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Fill the cup, Take a sip, Hold the chair and Get the stretch….

The inner soul sucks when the stock market falls high for days in a row. Our life’s hard earned money are often on heck, after all.

But what if I say you can earn high bucks even if you don’t stick at stock screens at the time of market crash and that’s just the thing: Stocks are most useful for long-term goals.

Situation after a big Stock Market Drop is terribly difficult for most of the investors – Here’s what I would do (or would have did) if I confront the same situation (in case)…..

So pour yourself a drink, or sit down with a pint of ice cream, and consider the following (five) things.

#1) Diverse your portfolio

Well diversification is not consider right when it comes to long term investments but you are not the stock market. Portfolio with diversified investment vehicle sustain in market crash. A great mix of equity and debt can levy you with fixed source of return even at the times of crash. However, it will hamper your return at the times of market boom but ignore it as you’re secured upon your investments. More the risk more the profit/loss and vise versa.

#2) Always be lambi race ka ghoda

If you have been investing in stocks in the last six years, you most likely are a big winner. It’s generally a bad idea to look at your investment statements too often, but take a quick peek.

I always quote this man for an excellent example of long term investment. He turned his 10k into 704 crore. However, it’s a fact that your long term portfolio will suffer badly at market crash and that somehow will resist you not to en-cash your investments. So as a hedge, always follow #1 to buckle up your portfolio with fixed source.

That outsize gain you see is one reason you are in stocks in the first place. Plenty of research shows that if you miss just a few days of the market’s biggest gains, your long-term portfolio will suffer badly. If you decide to put a bunch of your money in cash this week, how will you know when to get back in the market? You’ll probably be looking for a sign, and that sign will be the very rebound days that you will have missed out on.

Want more? Consider another point:

#3) Trigger your gun

Market crash provides you the opportunity to buy wonderful stocks at bargain rates. Shop as much stocks as you can. Sooner or latter, stocks will hike up when the market crash fade out. Put choose the stock with great cure or apply this 3 strategies that even a dumb can understand.

But still nobody knows for sure how much will market decline 10%, 20% or more. This hamper you with a question, when should I enter in market when it crashes?

That’s what brings you to point #4) Invest strategically.

If a decline does happen and you are a regular investor, you’ll be buying more when prices are lower. Look over the investments of Mr. Buffett. Most of them are executed at market crash. No problem, if the stock decline further more. What matters is its future growth.

So here’s the strategy…

Don’t put your all money in one stock. Invest in 3–4 segregated stocks and watch them keenly for couple of days with some cash available in your banks. Then with every decline insert your money in them. As you can’t predict when will market stop declining so it will be helpful to reduce your average cost. However it’ll increase your transaction charges.

#5) Last but not the least (outsourced from New York Times)

Some people cannot handle the stress of investing in stocks. But try to give this more time, and consider the alternatives. There are few investments that can deliver the kinds of returns that stocks can without their own accompanying anxiety.

Another alternative is to save a lot more in safer investments like cash or certain bonds. Most people don’t have enough income to do that easily, so settling for lower returns will mean a combination of working longer and living modestly, forever. For some people, that is a fine trade-off.

Final thought.

You may have lose your all of your savings in market drop or have eroded your whole hard earned capital. Bu don’t worry, buckle up your mistakes and try to find the flaws in your investing style.

Just calm down.

About Sowmay Jain 53 Articles
Hello! I’m from Hub of IT (ha!) Hyderabad, India. I work full-time from home, making a living from my blog and another dynamic medium from my investments. Like so many other people, I’m on my Plan B career. At the same time, I share ideas and techniques to help my readers in mastering stock market and overcoming losses.
  • Sreenivas Doosa

    I was looking for answer to a question “When to enter market during crash ?” and this post did the job well. Thank you.

    • Wow! I thought this was my worst piece of content ever. Thanks for your appreciation and reading every article on the blog.