The fact of the matter is, after every market correction that India has seen over the last decade or so, the market eventually stabilizes, and in most cases, yields great returns for those who were prepared and worked their way around it.
Pay attention to what everybody else neglects.
Most investors look only to strong markets. If you want to invest, look or the bear market. Many have frequently profited by investing where no one else saw potential. You can be rich if you have the courage to buy something while it is still under the radar of conventional wisdom. Sometimes, the more ridiculous an investment sounds to other people, the better the chances that it will yield a profit. It is difficult not to run with the herd. But the truth is that most long-term success stories are written by folks who have done exactly that.
The more certain something is, the less likely it is to be profitable.
Nothing in this world is absolutely certain. When many people are absolutely sure of something, you should be suspicious. Do not think in terms of what you wish. Never act without checking the facts. Whenever you see people acting in the same way, it is time to investigate supply and demand objectively. In 1980, everybody wanted to own gold pushing the price to $850 per troy ounce. But gold began to get overproduced as the suppliers were bound to increase production to match the price rise. A lot of individuals bought gold at inflated rates assuming it is not just “any commodity”. As more gold began to get mined, demand scaled back. Many who owned gold jewelry sold it to the refineries for melting, which further increased the supply. By 2000, the price had dipped to $250 per ounce. The exact same change in supply and demand happened with silver, which tumbled from $50 in 1980 to under $4 a couple of decades later. When you see the mob mentality and see them being unrealistic, stop and make an objective assessment of the supply-and-demand equation. Anything that is a “must-see,” “must try,” “must-read,” should almost certainly be avoided, especially if it is popular.
A good rule of thumb is to sell during times of market hysteria and buy during times of panic.
Don't sell short simply because prices are high. Never sell short unless prices are astronomically expensive, and you detect negative change coming. A cheap price alone is not a sufficient reason to invest. If something is forever cheap, then it has no recognized value, and its stock may very well remain a worthless piece of paper. For a bargain to soar in price, there has to be a catalyst, and from an investment perspective, that catalyst is a change. Whatever the change may be, it must have a significant impact within a country or an industry, and it must also be recognized as significant externally within a few years. If the change is real, others will notice the improvement, and prices will rise to reflect the new circumstances. New investors will catch on and prices can rise considerably for years.
Keep your eye on the future.
People used to call China a graveyard for investors. As recently as the late 1990s, few Westerners invested there. But those who did make a fortune. Also, do not cling to anything that will eventually cease to exist. No matter how much time or energy or money you invest in it.
Rely on your own research and intelligence.
It’s important to decide for yourself what’s important to you and what you want before you turn to others. The only way to really evaluate advice is to first learn everything you can about the subject at hand. You can learn about Elliot Wave Analysis Course here
Research your investments thoroughly. Make your own decisions. Look through each and every financial statement you can get your hands on, including the detailed notes. If you just read the annual reports of companies, you will have done more than 98% of investors. If you read the notes of the financial statements, you will be ahead of 99.5%. Verify those financial statements, as well as future projections announced by the top executives, by doing your own legwork. Talk to customers, suppliers, competitors, and anyone else who might affect the company.
Do not invest unless you can say with absolute certainty that you are more knowledgeable about this particular firm than 98% of the analysts on the Street. The most common reason why people do not succeed is that their research is faulty or limited to the confines of what is immediately available. Only through meticulous research will you obtain the knowledge necessary for success.
Know when to do nothing.
Anytime that you think you’ve become a financial genius – when, in fact, you simply have had the good luck to turn a profit – it is time to sit back and do nothing for a while. If you stumble upon success in a bull market and decide that you are gifted stop right there. Investing at that point is dangerous because you are starting to think like everybody else. Wait until the mob psychology that is influencing you subsides. Ignorance is born of an outsized sense of self-importance. Never let yourself become arrogant. Study hard. The more you learn, the more you will realize how little you know - and armed with this humility, you will never lose sight of the distance that separates self-confidence and self-importance.
Set Your Money Goals
Without a solid set of financial goals, there’s no way for you to understand where and why you should invest. Without clarity on this matter, it could become quite difficult for you to figure out what steps you should take during a market correction. Our advice would be to sit down with your personal financial advisor and clearly define your financial and life goals before you start investing. And once you’ve got them noted down, stick to them. This is the first rule of being prepared to deal with any market correction.
Manage Risk Through Insurance
Get yourself insured at the earliest. Not only does this allow you to get lower premium rates, it makes sure that in case of unforeseen circumstances, you always have an extra layer of financial protection for yourself and your family. This way, even if a market correction adversely affects your ROI, it won’t affect you and your family in times of need.
Maintain an Emergency Fund
Even if you aren’t preparing for a market correction, setting up an emergency fund is one of the best financial tips you can get in this day and age. The logic is quite simple; much like insurance helps you mitigate the cost of specific expenses, an emergency fund can be used by you to cover any costs, even for commodities and services not covered by insurance.
Focus on Asset Allocation
Getting the right asset allocation in place is one of the first steps towards a fruitful long-term investment plan. Depending on the type of risk you’re willing to take, work with your financial planner or wealth management firm to get an idea of the type of assets you should be investing in.
If you’re comfortable with dealing with a volatile market, you could invest into instruments like equity mutual funds or direct stocks. If safety is the criteria then fixed deposits, Govt. schemes like the Public Provident Fund, and debt mutual funds are a smart choice. However, don’t put all your eggs in one basket. No matter what type of investor you are, your portfolio should have a good blend of such investment vehicles in order to minimise the loss of ROI due to a market correction.
Things you shouldn’t be doing if you want to survive a market correction –
Put Your Wants Before Your Needs
Quite simply, don’t ever bite off more than you can chew. Investments aren’t a game, and there is no tried-and-tested formula to help someone make money. Even if your investments are doing well and you are receiving good returns, do not use them to finance your desires for things you don’t need or can’t really afford. It’s always a good feeling to know that you have more money to spend, but that doesn’t necessarily mean that you have to spend it.
Always keep the end goal in mind and don’t be swayed or tempted to make decisions that may satisfy you now, but end up putting you in a sticky situation later.
Let Your Money Sit Idle
Perhaps the biggest mistake any income-generating individual can commit. The whole point of creating a financial plan is to put your money to work. If you’re letting the money collect dust in your bank account, you’re doing yourself a grave disservice. Factor them into your investments as well or see if you can make increased investments and prevent your money from lying stagnant.
Get Emotional About Investments
We have good days, and we have bad days. So does the market. Sometimes the bad days can seem to last forever, but like everything else in life, they too come to an end. Don’t let your feelings get in the way of your investments, that is not a good combination at all.
Get Swayed By ‘Market Trends’
No one can predict the market, and you should stop trying to do so as well. Your priority is not purely just to make money. It’s about having the right amount of money at the right point in time. Don’t spend your time trying to decipher what the ‘experts’ are saying. As mentioned above, build a robust financial plan and stick to it. Don’t look at short-term high-return investments with wide eyes and forget that there is a bigger picture to look at; your personal and financial goals. You can make easily a good profit on a daily basis using the Best Bank Nifty Option Tips and start trading like a pro trader.
Regularly Review Your Plan
Yes, we have been telling you to create a financial plan and stick to it. However, these plans are dynamic. What this means is that you can’t build one financial plan and keep making the same investments year after year for the rest of your life.
As life goes on, you will go through a host of changes like salary hikes, promotions, relocation, and the birth of a child. At each stage, your plan should be flexible enough to let you seamlessly move into an investment mode that helps you achieve your new goals. Similarly, it is good practice to periodically review your plan with your personal financial advisor and see where you can make changes in order to get the most out of the investments that you make.
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