Since markets are witnessing a downtrend since Jan of this year, Long Term Investors are worrying a lot about their portfolios
. Today’s article is not on a trading subject; rather, in today’s article, I will explain to you how to survive the bear phase of the market and how you can use this bear phase to add more stocks or mutual funds
to your portfolio.
Before going further, one important disclaimer is that I am not a SEBI
registered analyst, so before making any financial decision, consult your financial advisor. The content published here can only be used for education purposes only.
• Things Long Term Investors should avoid in a bear market
The bear market
is the worst phase for any investor because it tests your patience, but the rewards can be exciting if you survive the bear market. So here are a few things you must avoid during bear markets-
1) Don’t sell your existing investments due to fear
As markets are in a downtrend, people are more concerned about the investments that they have made at the higher levels in quality stocks. One important thing one needs to understand here is the losses that you are carrying in your portfolio as of now are unrealised losses, so if you have invested in stocks or mutual funds for the long term, then you don’t have to worry much.
One more important point I would like to add here is the returns you get from the equity markets are not free returns; they come from the right analysis, patience, and courage to hold during tough times. So, always keep in mind the long-term
The long-term trend of the stock market is always bullish, so these short-term bear grips are like a small pullback on a bigger time frame. While writing this article, I came across some important data points that I would like to share here-
“The average length of a bear market since 1950 is about 418 days.
Bear markets often proceed recessions which last an average of 11 months.”
Also, the average bull market has lasted roughly 2.7 years and brought a gain of roughly 112%. It is always beneficial to play a long-term game.
Also, if you are doing covered calls, then try to be cautious because continuous selling has been observed in past days, so there may be the possibility that the market can bounce back from any level.
2) Add Quality stocks to your portfolio in phases rather than adding a lump sum amount
Often, investors make the mistake of investing in a lump sum with the hope that the market will bounce back from that particular level, but it is the wrong way to add in the dip.
You should always invest in phases so that you don’t miss the whole dip. For example, if you have 2 Lakhs rupees and you want to invest in Nifty Bees, consider the current level of nifty as 16500. Now, rather than investing the whole amount at this level, try to invest in phases; for example, buy nifty
bees worth rupees 30 to 40k at this level, then again buy nifty bees if nifty slides down to 16000 and so on…By doing this, you will be able to encash the entire downtrend.
One more thing you can do during this period is to convert debt instruments into cash instruments; in simple words, if you have some liquid bees or bonds
in your account, then it is a good time to convert some of these bonds or liquid bees to additions. Also, if you are afraid of buying stocks in this phase of the market, then you can also invest in index mutual funds
or nifty bees, which carry lower risk and less fluctuation.
So, these are some of the hacks you can use to tackle this bear grip. Remember that; instead of panicking and exiting your previous investments, try to analyse the market and try to add quality investments to your portfolio because markets always reward patience and courage to hold good investments for the long term. If you like this article, don’t forget to share us across all your social media handles.