The decline in the stock market started about four months ago. The market’s major index Sensex and Nifty have fallen significantly from their all-time high of September 2024. This decline has made the investors who invested in shares at higher prices. They did not know about the market to start declining. These investors are in a lot of loss. Experts say that looking at the history of Makett shows that many times the market’s major index had fallen more than 50 per cent. Then, recovery started in them and they reached all-time high. The ups and downs are the nature of the market.
Market after every big round of fast (Stock market) There is a decline in. The market accelerates after every major decline. Investor will have to focus on creating a portfolio that has the least impact of the market fall. Investors need to keep three things in mind.
Be positive and cautious
It is necessary to be positive for investor. Also, he will have to be vigilant. This will make it easier for you to face difficult times. The world’s legendary investors such as Warren Buffett and Hovard Marx were well prepared to face the decline in the market due to Kovid. This does not mean that he had already gauged the decline in the market, rather he had created a strategy that had the ability to protect his portfolio from a big shock. For this, you have to identify the market bicycle and take a lesson from the history of the market and be ready to face a big decline.
Take care of dynamic allocation in portfolio
Smart Investors keep an eye on the valuation of the market and the behavior of investors. They know that there is a big hand of human nature in the stock market to reach the peak and fall to the ground. Smart investors are ready to take advantage of such occasions. For this, they use the principle of margin of safety. This means that a stock be purchased at less than its fair value. This reduces the scope of loss in the event of a decline and increases the scope of profits in the speed. A tool such as a long -term price to earning ratio can be used to find out the fair value of a stock.
This can be understood by an example. The 15-year average PE ratio of the Sensex is about 19-20 times. It has reached 28–30 times in the market of boom in the market, while the bicycle of declining has come up to 10-12. This means that when the PE ratio of the Sensex crosses 21, investors need to reduce investment in shares. This is the time to increase investment in shares when the PE ratio falls below 18.
The new investors might not know that the stock market has fallen more than 50 percent at times before. Such situations will continue to come even further. No one can tell when it will happen. Therefore, you can maintain your portfolio according to your ability to tolerate the election loss of shares.
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Keep patience
Patience is necessary to invest in the stock market. Investors who had patience and trust in the market have earned money in the market. Investors are usually happy when they climb and become restless as soon as they fall. They take decisions related to the market by looking at others. This causes damage. You have to trust your strategy. In case of decline, you have to work according to your plan. What other people are doing, it will not be noticed.