Markets crash: Selling in haste may bring heavy losses

It began with a small fall. Then there was a recovery. Experts called it volatile times. But soon the Stock Market came crashing down, day after day. Not just in Nepal but its happening world wide. Many lost all their savings. For others, it is a difficult time to make decisions. Should they sell, buy or simply hold? For investors who had a jolly ride over the past few years, it was a rude shock. It was a turbulent and unhappy ending that many investors find hard to digest. What should you do in a crashing market?

Here are a few tips:

Do not panic
Ups and downs are a part of stock markets. What goes up must come down and what comes down must go up. This explains the market behavior. It may take a few days, or weeks, or even months. But the wheel will rotate. An index cannot rise up indefinitely. So, a fall is a natural market phenomenon. The economy is strong. There is every possibility that markets will recover and bounce back to even stronger levels.

Wait and stay calm
This is the golden rule for turbulent and unpleasant times. Some people indulge in selling their shares in utter haste. Nobody can predict the markets. So why burn your fingers? Stock markets must be viewed as long-term investment vehicles. So do not sell in haste. Things will improve. It will take time and no one can predict it. Have an investment horizon of five to 10 years. Hold your stocks till then, unless there are enough indicators that the company is expected to fare badly. Stocks are good long-term investment instruments but can turn risky or even dangerous in the short term. Hence, simply hold. If you have a well-diversified portfolio, there is little need for you to worry. Even if the fall is owing to a particular sector, the other sectors will pull your returns up. To accurately time the market is impossible. Even the experts fail many times. Nobody can predict how the market mood will change the next minute. Hence, have a long-term investment horizon. For those who have to sell, exercise caution. Bad markets expose weak companies that struggle to make a regular profit. If you do not have faith in a company, selling can be your only option. Research the company before making the final sell decision. It can so happen that you sell at a loss and have to reinvest elsewhere at a high price.