Another crisis unfolding in the US, if this is likely to give you sleepless nights and you ponder on whether to sell or hold on to your equity portfolio, here’s a word of advice. Stay calm and invested, don’t panic and sell.
You don’t incur losses till the time you book them. Equity markets behave in this fashion and investors should take such falls in their stride. If you are a long-term investor, you are likely to get the best returns in such turbulent times.
At such low levels, markets look quite attractive. For investors waiting to venture into the markets, this is an ideal time to average out the cost of purchase. Invest in stocks that are fundamentally strong, preferably in a broad-based index that gives you exposure to large cap stocks. Avoid small or mid-cap companies. But if you lack understanding or don’t have much information, then take the help of professionals or try the mutual fund way.
To start off, one can look at index funds that mirror the movement of an index. Index funds should form the nucleus of your equity investments and other funds should surround it. These funds act as a stabilizing factor in an equity portfolio and should not be always seen as a return-giving factor.
But how about those who are already neck-deep into equities? “Stay invested. Don’t change the investment strategy and keep investing in a staggered manner.”
The global stock markets, after a sustained bull run of almost four years, have behaved erratically since the beginning of this year. Plagued by global ills, the markets have shed a lot since January this year. The present situation might look grim to investors, but there is no reason to worry. Stock markets right now are being driven by sentiments rather than fundamentals.
Markets are largely driven by demand and consumption and the present conditions look good.