What "NOT" to do in Stock market Fall

Morgan Housel @morganhousel

All past declines look like an opportunity, all future declines look like a risk. 🤷

What a wonderful thought by Morgan Housel.

Do you ever feel - “I must have purchased quality stocks during the 2008 crisis or the 2020 crisis?” Then the above quote is for you.

Whenever we look at a past decline it looks like an opportunity, we say काश तब invest किया होता!

But when we see the markets going down in front of us or when someone talks about it that it will fall in future, we take it as a risk.

Be Fearful When Others Are Greedy and Be Greedy when others are fearful - Warren Buffet

Information- Learn about Mutual Funds with me. Use Code- HNY26 to get flat 26% discount.

Use Code- HNY26 to get flat 26% discount.

Thoughts on “Buy the dip”

safalniveshak.com @safalniveshak

Please don't buy just because it has dipped. Buy ONLY if it has dipped to a level that provides you sufficient margin of safety. And once you buy, know that it can keep dipping.

Here is another one from the one and only Vishal Khandelwal.

safalniveshak.com @safalniveshak

DO NOT average down just because the stock has fallen. Average down because the business is as good as when you bought it earlier at a higher price.

Buying on dips or declines is not as simple as it seems. I am not a big fan of the deeply discounted prices, but you must go slow when you are buying on dips.

Also, be mentally prepared even the greatest of the business can keep dipping for a few days in a row. Don’t go all in.

Information- Learn about Mutual Funds with me. Use Code- HNY26 to get flat 26% discount.

Use Code- HNY26 to get flat 26% discount.

How much will the market fall?

Believe me, no one knows it. Go slow.

D.Muthukrishnan @dmuthuk

Don't panic sell. Buying dips not compulsory. Do nothing. Buy only: If you've long term money. Can withstand short term pain. Fine with inability to identify bottom. Otherwise, doing nothing is the best course.

Another one-

D.Muthukrishnan @dmuthuk

No doubt bear is mauling all portfolios. It is ok if you lack money or conviction to buy. But do ensure that you don't sell good companies making temporary loss into a permanent one. Remember that good companies would always make a comeback.

What not to do when the market is falling?

• Don’t sell in panic.

• Don’t borrow for investing with the thought that the market will recover soon.

• Don’t stop your SIPs in your equity mutual funds.

• Don’t let temporary falls affect your mental health at all.

• Don’t use your emergency funds to invest in falling stocks.

• Don’t fall for FOMO when markets corrects.

D.Muthukrishnan @dmuthuk

Stock prices shouldn't end up distracting us from the underlying businesses.

A stock can be priced very high because of temporary news but if the business is not good stay away. In the same way, stock can be beaten down in prices because of temporary events, it does not mean you should sell it.

The bottom line is - Focus on Business, not on the prices.

Cash is the king

Buffett’s large cash balance not only insulated Berkshire from the broader market turmoil, but it also gave the group the optionality to take advantage of others’ weaknesses. Buffett explained this principle in a meeting with the University of Maryland students in November 2013:

“BRK always has $20 billion or more in cash. It sounds crazy, never need anything like it, but some day in the next 100 years when the world stops again, we will be ready. There will be some incident, it could be tomorrow. At that time, you need cash. Cash at that time is like oxygen.

When you don’t need it, you don’t notice it. When you do need it, it’s the only thing you need. We operate from a level of liquidity that no one else does. We don’t want to operate on bank lines.

Something like that will happen maybe a couple of times in your lifetime. Two things when it happens again - don’t let it ruin you, and if you have money/guts, you’ll have an opportunity to buy things at prices that don’t make sense. Fear spreads fast, it is contagious. It doesn’t have anything to do with IQ. Confidence only comes back one at a time, not en masse. There are periods when fear paralyzes the investment world. You don’t want to owe money at that time, and if you have money, then you want to buy at those times. Be greedy when others are fearful and fearful when others are greedy.”

Holding cash gives you options and freedom. You might miss out on some market gains in a bull market, but how can you put a price on cash’s optionality in a recession?

Information- Learn about Mutual Funds with me. Use Code- HNY26 to get flat 26% discount.

Use Code- HNY26 to get flat 26% discount.

While it might be painful to hold a lot of cash in the short term, it will undoubtedly pay off for patient, long-term investors.

My Own Experience

The most important asset when the stock market is falling is cash. Always set aside some cash in 100% liquid funds. I prefer to keep it in a savings bank account. You might feel a little surprised at this idea, because this cash will not earn you anything, but you will realise the importance of this cash when the stock market falls and you will have some amount to invest.

This is not at all an attempt to time the market.

It is like an opportunity fund to be utilized when markets give chance. It can be tempting to invest all of your assets in stocks during a bull market. People ignore the value of cash in the portfolio. Keeping cash helps in avoiding the overvalued companies and also gives an opportunity to buy quality ones when opportunity knocks on the door.

How does this work?

1. You subscribe to my write-ups. (No cost at all)

2. Check your email after subscribing.

Shift “The Money Blog” From Promotion or other tabs to your Main Inbox

1. Check whether The Money Podcast is in the promotion tab.

2. Click and Drag it to your Inbox.

3. Click yes on Do this for future Dialog box at the bottom left.

Also - add themoneyblog91@substack.com to your contacts in your email account