Investing in the stock market can be an emotional rollercoaster, especially for newcomers who often lack experience. When the market takes a downturn—often marked by declines of 10% or 20%—it’s natural for panic to set in. New investors, who might already be feeling uncertain, can react strongly to these declines. This instinctual fear, rooted in human behavior, frequently leads to poor decision-making during tumultuous times. Historically, many individuals have lost money in the stock market due to anxiety and hasty choices. They often sell their stocks at a loss, thinking they’re cutting their losses, only to watch as the market rebounds. The reality is that panic-driven selling can be devastating. It not only damages personal finances but also contributes to a broader misconception that the stock market is a high-risk, loss-making venture. It’s important to understand the difference between what we think might happen (the “myth”) and reality. Market downturns can feel severe, but history shows us that the market rarely stays down for long. In fact, over the past 50 years, the stock market has typically not remained in a significant decline for more than eight months. This offers a glimmer of hope for investors: the downturns we experience are often temporary. Let’s say you invested one crore rupees in shares or mutual funds two years ago. At the peak of the market, the value may have been around 160 lakhs. If the market drops by 10% to 12%, the value of your investment might decrease to 140 lakhs. While this seems alarming, what you must remember is that you’re not realizing a loss unless you sell. As long as you hold your investment, its value is only on paper. And when the market rebounds—as it historically does—you may find your investment reaching even higher values, perhaps 1.75 cr or 1.80 cr which means you’re still ahead in the long run. The key to surviving a market decline is discipline, courage, patience, and holding a well-diversified portfolio. By protecting yourself from the urge to liquidate at low prices, you can ride out the volatility that characterizes investing. Avoid taking on significant debt or borrowing money to invest, as this can further complicate your financial situation. Ultimately, the best approach in uncertain times is to respect your portfolio and seek advice from knowledgeable sources. Stay informed, remain calm, and remember that the stock market declines are, more often than not, a part of the investment journey, not the end of it. By maintaining a long-term perspective, you can navigate these challenges without losing your peace of mind or financial footing.
- Disclaimer: This article is for information only and doesn’t offer investment advice. It’s not an endorsement or an offer to buy or sell any financial products. If you decide to act on the information here, you do so at your own risk
The post first appeared on Kashmir Observer
