The current stock market turbulence is a normal pause, with equities delivering healthy returns over time. The current situation is not extraordinary, and the core principles of investing remain unchanged. For example, emu farming and cryptocurrencies reinforce the old principle of avoiding investments that generate no real economic value, despite the emergence of new phenomena.
Fundamental investment truths, such as the importance of your investment timeline, are crucial in unstable markets. The market’s upward trajectory is permanent, and recovery takes a year or two. Bear markets are temporary, not equity investing.
The key to successful investing during market downturns is to focus on quality and diversification. Individual stocks can fail permanently, but careful investors can avoid risks or limit exposure. In 2020, the Sensex experienced a significant drop, but every trade had both sellers and buyers, who turned panic into profit. The challenge lies in not optimizing entry points, as smart investors bought throughout the year, not just in the specific months.
Market downturns in history have often been buying opportunities, as seen in early 2020 when the Sensex dropped from 41,000 to below 30,000 before rising to 47,000. The challenge with buying during downturns is not optimizing the entry point, but buying throughout various months. Market cycles often repeat themselves, but it’s important to remember that abandoning an investment plan during market turbulence has never been the right choice. Those who stick to their well-thought-out strategy, such as regular investments through SIPs or systematic buying, typically emerge stronger from these periods. Remembering these basic truths can help overcome anxiety and ensure a successful investment journey.
