As usual let me start with a caveat. To join a media house and do financial journalism there is no great qualification barrier. There is no training that is necessary. If you took the trouble to learn and get trained, great luck. So our financial journalists do not use very clear terminology, but here is an attempt to tell you what those words mean. If you do not know / do not understand / do not read this post will your returns be impacted. IN my view no. However if you turn your fear into panic, it will hurt your portfolio.

When the index (say Sensex) declines 10% to 20%, it’s known as a market correction. If the market drops less than 10% it’s called a pullback. And if the market falls more than 20% it’s labeled a bear market.

Do our journalists and experts who come on TV stick to this terminology? No. Do I use this terminology? No. Frankly to me it does not matter, however if the gyrations in the market matter to you, this post will help you to calm your nerves.

Let us assume that in the past 36 years the market went down 20% or more 4 times, that’s just about once every 9 years. During that same period, the market fell into a correction (losing 10% to 20%) 12 times – or once every three years. And even during good years, the market has its rough spots. Even in years when it went up it may have gone up or down far more violently than what we are willing to accept. In my head there is no great difference between a 2% pullback and a 9% pull back. How about you? If it does not matter, step one is to forget the terminology and understand your feelings.How will you react to a fall is in your MIND, not in your excel sheet.

For some scrips and for some people hold and buy works well. For some people it is smart industry allocation – and rotation. Both are strategies. Both are right and both are wrong. One thing is certain in both the strategies you will not have only wins or only losses. Both strategies are correct. See what suits you. I do both for different portions of my portfolio. I also do delivery based trading. Makes money for me. See what works for YOU.

So see what works for you. Do not do TV gazing to hone your strategy. If you are a buy and hold investor (i have been holding Gillette, Colgate, PnG, Hdfc, Hdfc bank,  for time immemorial, it works) or you are a positional trader (I do in Reliance, Cholamandalam, Kotak bank). I do strict stop loss based positional trading in Suzlon, Kwality dairy, Speciality Restaurant,…

So do not get stuck in a label as an investor, trader, FnO trader,….or get trapped in technical jargon – short term, pull back, correction, bear market………………see what works.

All the best…God bless…..

Related Articles:

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes:

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>