If you have lost money in the stock market you are not alone. What is the best thing you should you now? Attack, says KARTIK JHAVERI.
Most experts that we read or listen to on TV and radio who guide us in terms of their views, outlook, predictions etc all seem to be pretty knowledgeable as they always have a view on everything. I have a view on the market too…. That it is one of the best places to create wealth. That all and that’s the only view I have. I cannot predict what will happen tomorrow or in the next week or month or quarter. Hence I don’t want to hazard any guess.
What I do understand though is if you wish to create wealth then stock market is one good option. If that were true then why should we have news that broking companies revenues are significantly down since January 08. That obviously means people are not buying and more so they are not trading. Trading I don’t recommend anyways but I can understand why people have stopped buying. Either they are nursing their losses and are happy with it or they don’t have more money. The latter is unlikely unless you have stopped earning. If you are earning and not investing then you are probably amongst those who are in gloom and despair and are scared to take the plunge again.
It is in times of despair and gloom that the best opportunities emerge. All of us know our theory well – invest low – sell high – have stop loss – book profit etc etc. But as it seems people choose not to act on these doctrines when they must… which is now or for that matter when there is despair and gloom or in more common words when there is blood on the street.
How would you rate a situation that you wait to enter and the market moves up by another 2-3000 points? You would not enter then – you would not enter now? So when would you enter? There is no definite point ever. Just enter and keen entering – slow, steady and gradual. In times of pain enter the markets forcefully.
It is in period of inactivity that you are recommended to be most active. Corrections appear to be savage and the downslide is rapid – that is what we feel. But look at the numbers in terms of percentages. A 500 point fall is about 2-3% or so which is normal. That is the nature of the market. It fluctuates. Can you make a decision for 10 years based on outcome of a day or a week or even a month?
Take stock of what you have, clear the duds in your portfolio and promise yourself never return to them again as the possibility of them shining again is remote. The good will always be good and will shine even brighter in times to come.
Another grave error which is done by many is that they move to safer heavens. Investments in fixed deposits and insurance policies tend to go up the priority list. This is detrimental to long term wealth creation. Wealth is created out of investments and not savings. It would be unwise to change investment allocation strategy but it is our compelling behaviour of fear that stops us from doing what is right. Some would argue that there is more safety in real estate and hence would move money allocation from stocks to real estate. The point to note that what moves up beyond realistic limits also comes down sharply in the same manner. There have been times when property in Japan corrected 75%. Closer to home real estate in South Mumbai has also seen as much as 40%-50% erosion in value from its peak a few years ago.
Anything that is based purely on demand and supply is not sustainable. There is a fundamental flaw there i.e. prices are artificial and not based on realistic fundamental factors. Be it real estate, bullion, equities – an investment at a fair price will always reap rich rewards.
Have faith, pick up the pieces and move!
