One thing that most beginner investors been dying to know is, “How do I make money in the share market?” And it is obvious for them to ask. So, how would you reply to this one? As we can see, an investor who is asking this to you must be looking for some latest stock market tips, so he/she can invest and get fruitful results in no time. Even a person who is in the stock market for a couple of years would ask the same thing.
Well, as far as we can see, any professional investor will simply tell you to “buy low, sell high.” Don’t you think? Yet, it is not what beginners expecting to hear. Of course, they didn’t. What they want to hear is, “How am I supposed to do that?”
Don’t you agree? Of course, you would.
So, if any investor follows this advice then on interpreting, it means you gotta buy when the stock market has fallen. The result, the investors believe that a “Stock Market Correction” is a perfect time to buy. Is it?
Well, if you have doubts related to investing during the time of stock market correction then relax! It is normal to have such doubts. Everybody start feeling nervous when it is about stock market correction. Especially, those stock investors who had long-forgotten the fear of – that market can still go down. However, a stock market correction is not that bad that you can’t recover. It is healthy for both existing investors and beginner investors who are planning to buy as per the tip – “Buy Low, Sell High”.
How to Handle the “Stock Market Correction” Situation?
As you know, the stock market correction is a reverse movement to adjust the overvaluation. When the last stock market correction happened in February 2018, many investors started panicking. But, investors who behaved rationally get the opportunity to make profits out of it. Also, many others considered it as a chance to evaluate their portfolio in order to prepare for the future bear market.
Even in the month of March this year when the BSE S&P Sensex dropped around 6 percent, many investors start panicking because of short-term volatility. Also, the net inflows in the equity mutual funds reached to 159 billion in last month this year which is lower than the average monthly run-rate of equity inflows in FY18.
Read More: Latest Stock Market News
According to experts, one should consider purchasing more stocks in the situation of stock market correction when the prices are low. Also, if you are holding shares then selling stocks will not work out the way you want. You will just be wasting your invested money and time both.
The short-term volatility shouldn’t be your major concern while investing in the stock market as a long-term investor. On top of that during the reverse movement, you don’t need to think of the short-term volatility unless the stock of the company doesn’t look encouraging. If you are holding stocks then you can think of it as a chance to evaluate your portfolio to reduce the risks of future volatility and prepare for the bearish market. But, if you are planning to invest and purchase stocks then no matter what others say, it is the right time to purchase at a low price. Yeah! But don’t forget to check for cash flows, debt-to-equity ratio and returns, price-to-earnings (P/E) ratio, and corporate governance.
Unlike Mid-cap and small-cap stocks, the large-cap stocks are safer to invest in. The reason is the “volatility factor” which has very high in small-cap and mid-cap stocks. However, the large-caps are considered the safe investment strategy to do long-term investments. If you are planning to invest for long-run then investing in the companies of large-cap stocks is the safe bet against the stock market correction and economic slowdown.
In that way, you may not get higher returns like in small-caps but also there will be no high risks associated with it. Or we can say, a good strategy to implement for beginner investors in stock market correction.
Systematic Investment Plan (SIP), an investment facility offered by mutual funds to investors to invest a small amount of money every month without worrying about the market volatility. You can check the performance of mutual fund schemes in your region and invest small over a period of time. The longer the duration is, the better it is.
Investing through mutual funds is a good way to overcome the jumpy feeling during the situation of stock market correction.
Final Thoughts: –
If you ever find yourself in a position of stock market correction then don’t feel nervous. Just think of it as a chance to evaluate your portfolio for future risks and buying more stocks in low price to build a strong wealth.
It will pass!
Also, the recovery in stock market correction is possible and it only last weeks to months. However, the bear market lasts years and it is very difficult to recover from the bearish market so think of it as a standard in practicing to handle the bear market conditions.