Market volatility leads to a bear market and we are either already in one or we will head towards one. Are we in a bear market? Well technically speaking when the market is 25% down from its peak it is said to be in a bear market. So if you take 30,000 Sensex as the peak 22500 is the signal of a bear market.
Will we go there?
will we turn back from 23,000?
Will we head for a Bull market?
Are we already in a bull market?
It is almost impossible to answer all these questions NOW. It can be answered only in the future. To make money you DO NOT NEED TO ANSWER THESE QUESTIONS.
However, if not now sometime later we will be in a BEAR market. How do you handle a bear market?
- Accept that bear markets are a part (important one) of the markets: look at oil, gold, Real Estate in many parts of India – they are going through a bear market are they not? No commodity can be in a perennial bull or bear market. So ACCEPT that one day there will be a bear market. Nothing to worry or fear, just acknowledging it in your head is a good first step. Remember we have seen the end of cold war, fall of Russia, Prime ministers being assassinated, recessions, bear markets, numerous corrections of 10 to 15%, frauds, scams, ..however the market has gone up from 100 in 1979 to 25000 in 2015. That is a good growth. So however gut wrenching your ride is, and whatever fall in your portfolio, you need to remain calm. Fear is NATURAL. Panic is optional.
- Bears bite, trample, sniff, kill,…: the severity of a bear market can vary from one bear market to another. Remember 2008 saw a quick V shaped fall and recovery. The steepness of the fall is dependent on the steepness of the rise. A bloated market will OBVIOUSLY fall more than a market which has gone up steadily. A bear market hurts a beginner more emotionally, but do remember that it is the older / senior player who has MORE to lose. However, the older player who has benefited by past bull markets has a greater MOAT..and an even better understanding. The guy whose family has been in equities for 80 years does not worry at all about the bears and the bulls – his dividend income does not fluctuate much, so the ‘wealth’ portion does not really matter to him.
- Bounce back is dramatic: Suppose the Indian market goes to say 23500 and stays there for a period of 6 months. How will you react? what is the wait is 13 months? The problem is the upward ride could be just dramatic. In 3 months it could go from 23500 to 33500 and NOT give you a chance to get in at all. So thinking that the grind was slow on the way down so the rise will be slow is a huge, huge mistake. It could go to 35000 in 4 months and then come down to 30,000 and stay there for 3 months. You just missed the ride from 23500 to 30,000 – and that is a dramatic 25%!! Forget predicting, movements can (and will) be jerky, so wear your seat belts and sit tight.
- Preparing yourself mentally and financially for a volatile ride is important: Like Amit Trivedi says – Riding the Roller Coaster – knowing what has happened in the past is very useful. Not that it repeats, but if it repeats you can see the pattern. Read about the past falls, scams, frauds, when there is a volatile upward journey be prepared for a dramatic recovery.
Being prepared is what you can do.
Post Footer automatically generated by Add Post Footer Plugin for wordpress.