While market downturns can be unsettling, they also teach new lesson young investors important lessons. There has been a significant shift in the approach of Indian investors in recent times.
What beginner investors should know
While traditional investments like fixed deposits have been increasingly sought after, investment opportunities including equity and mutual funds are also gaining popularity.
Many younger investors, in particular, have become aware of equity investments. Since equity investment is considered to be more profitable in the long term, the interest in equity investment is welcome.
What is the lesson of market efficiency
However, for investors attracted to equity investments, a sudden decline like the one that occurred early last month can be a shock. On January 6, the Sensex fell by 1600 points.
This also resulted in huge losses. For those attracted to the returns that equity investments can offer, this loss must have caused confusion.
Amidst this fear, many may have sold their shares at a loss and exited. It is important to know how to avoid losses in such market declines.
Market declines and fluctuations are a part of the stock market. This is also a lesson that first-time or new investors should learn.
Since market volatility is inevitable, we should learn to face it. The first thing is that when the market declines, we should not panic and withdraw our investments, but rather analyze, investigate and understand the reasons for the decline. Specific events and many general trends can be the cause.
How to evaluate market expansion
At the same time, it should be noted that despite the fluctuations, the stock market has been performing well in the long run. Stock market statistics indicate that a 10 percent decline at a time is normal. The market has consistently recovered from the decline.
In many cases, the reasons for the decline may be temporary. Therefore, one should focus on the fundamentals. As far as the Indian economy is concerned, the fundamentals for growth are strong.
In dealing with volatility, expansion is considered the right strategy. Investing in value stocks can overcome volatility, and investing in many sectors provides protection for expansion. One should also look at whether the stocks are overvalued.
Also, you should invest in debt, gold and stocks according to your financial goals. In a falling market, you can also buy valuable stocks at low prices.
Therefore, you should focus on following growth strategies rather than acting according to the market trend. For this, you need to develop the patience and research approach required.
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