what should long term investors do during market volatility ?

It’s been a story of new investors crying foul over markets falling every day and we even see memes like “Nifty has strong support from 3.30 pm to 9.15 am these days”. Should this really be a cause of worry? What should new investors do during these volatile days? What can old investors do? I shall try to answer these questions in this blog if you have them in mind.

What can old investors do?

First and foremost things that I would suggest is not to worry about the short term crash and volatility as your objective should be long-term wealth creation. So do n’t stop your current SIP’s instead review your portfolio first. If you would want to make any changes in the equity portfolio you can make them now as most of the stocks and equity mutual funds are below the value of Jan 30thso that you can reduce your LTCG cost for portfolio clean up.

If you would like to stick to your existing stocks/ mutual funds you can add more of them at regular intervals so that you can reduce your average cost if you had bought at high price.

Take away: Don’t stop SIP, Rebalance, buy more regularly as much as possible

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What new investors should do?

As a new equity investor the crash might give you heart breaks as you may be afraid of investing in equities or you might already be sitting on loss. Does it mean end of everything ? not at all. These kinds of corrections and crashes are part of equity markets and as you get experienced you will get used to it.

This is the right time for you enter into equity investments as you get good discount from recent high made. However it wouldn’t be wise to invest all your money in one go. First of all define your goals, see what goals are away by 10 years. Now based on the goal above 10 years and your risk capacity define your equity allocation.  Choose your funds/stocks wisely and do SIP’s for financial discipline. Also add more equities in lump sum whenever you see a considerable dip. Remember you don’t know what is the bottom. Hence whenever you feel valuations are attractive start adding them.

Take away:  Start SIP’s. Add more in lump sum on dips.

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The bottom line is if you are a long-term investor,   stay invested and add more on dips.

Also read,  6 Key Ratios to look at before investing in a stock

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