Mastering market mayhem: Stay calm, stay invested

The stock market doesn’t move in a straight line. There are times when prices rise, followed by periods when they drop.

Markets go up, and markets go down — it’s just how they work. Sometimes, everything looks great, and stock prices keep rising. Other times, things take a turn, and prices start falling. When this happens, many investors panic and sell their investments out of fear. But history shows that markets always recover, and those who stay calm and patient often benefit in the long run.

Why market crashes feel scary

Seeing your investments lose value can be stressful. It’s natural to feel worried and think about selling to avoid bigger losses. But before making any big decisions, take a moment to remember why you invested in the first place.

How markets move in cycles

The stock market doesn’t move in a straight line. There are times when prices rise, followed by periods when they drop.

Market drops can happen for many reasons — economic slowdown, inflation, political events, or company failures. But successful investors don’t let short-term problems shake them. By spreading investments across different types of assets like stocks, bonds, and gold, they can reduce risk and recover more quickly.

No market crash lasts forever, and no good investment grows endlessly. The key is to stay patient, keep a long-term view, and not let short-term fear drive decisions.

Time and again, markets have shown resilience. Those who sold in panic often missed the recovery, while those who stayed invested saw their wealth grow.

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How to handle market volatility

Experienced investors recognise market downturns as opportunities for strategic action. Here are some well-grounded strategies to manage volatility wisely:

Look for buying opportunities

During a crash, stock prices of fundamentally strong companies often dip below their actual value. Seasoned investors use this period to accumulate high-quality stocks at lower prices. Warren Buffett’s famous principle, "Be fearful when others are greedy, and greedy when others are fearful," applies perfectly in such times. Investing in companies with strong balance sheets, reliable cash flow, and a solid track record can yield significant returns once the market rebounds.

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Focus on the long-term vision

The stock market operates in cycles, with inevitable periods of growth and contraction. Short-term volatility does not define an investment’s overall performance. Those who stay the course often reap the benefits of compounding over time. Instead of making decisions based on temporary downturns, it’s wise to stick to a well-structured investment plan and align it with long-term financial goals.

Leverage systematic investment plans (SIPs)

SIPs allow one to automate investments, ensuring regular contributions regardless of market conditions. This approach enables investors to buy more units when prices are low and fewer when prices are high, effectively averaging out the overall cost of investment. The power of Rupee cost averaging helps mitigate risk and ensures consistent wealth accumulation, making SIPs an excellent tool for navigating market turbulence.

Also read | Time to Bond: Why you should lock in & load up on fixed income assets now

Ignore short-term noise and stay informed

Financial news, social media, and speculative forecasts often create unnecessary panic during market downturns. Headlines designed to grab attention may amplify fear, leading to rushed and uninformed decisions. Instead of being influenced by negative sentiment, investors should rely on data-driven research, sound financial principles, and expert advice.

Finally

By staying calm and focusing on long-term growth, investors can navigate market volatility with confidence, knowing that recoveries follow every downturn. The key is to remain disciplined, stay invested, and embrace the market’s natural ups and downs.

The author is Cofounder & Executive Director, Prime Wealth Finserv Pvt Ltd.

Disclaimer: The views expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.