When market is sinking, most people get fear and immediately stop investing. But intelligent investors know that falling markets are also opportunities. In finance history, every downfall has created next bull run. Markets always move in cycles. If you react with panic, you lose money. If you react with logic, you can build wealth.
Below are three important approaches to make investment during sinking or falling market conditions.
1) Focus on companies / funds with strong fundamentals
In bear markets, weak companies will fall faster. But strong companies become available at discounted valuations. So study the balance sheet, debt levels, management quality, cash flow and business model. Avoid penny stocks. Avoid companies with negative future. Invest in companies with long-term sustainable brand or moat. This is called “value pick buying”.
2) Do SIP Averaging, not lump sum
The best method in falling market is SIP (Systematic Investment Plan) based averaging. Because price is falling, your SIP buys more units at cheaper price. When market recovers, your average cost is lower and profit is stronger. Never put full lump sum in one day of panic. Spread it slowly over down trend. Step-by-step buying reduces emotional pressure.
3) Stay patient and think long term
Bear markets are temporary. But long term compounding is permanent. Historically, every crisis led to a bigger next cycle. So think 3 years – 5 years – 10 years horizon. Don’t watch daily price noise. Don’t compare with others. Follow your investment plan. Market believes in patience as currency.
During sinking markets, risk is high but reward potential is also high. If you have discipline, research and patience, this period can become the most profitable buying opportunity of your investment journey.
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