On Monday 20th December 2021, the Indian Stock Market witnessed a significant freefall and bloodbath across the indices. The major benchmark indices Nifty 50 and Sensex were down by 2.19% or 372 points and by 2.09% or 1,190 points respectively. In this situation, many investors get impulsive and take unnecessary steps which could act as a big setback to their wealth creation journey. Hence, in this article, we will be covering various factors which need to be kept in mind in the situation where the market is falling. Also, we would highlight the important factors behind this fall in the stock market.
During a falling market, the investors are allotted more units in the mutual fund due to a fall in the Net Asset Value (NAV) of funds, and hence one should not stop SIPs and continue to invest. Here, an aggressive approach can be also taken, if the investor feels comfortable. Further, this period only skyrockets your CAGR returns over the longer horizon,
Generally, Asset Allocation should be followed by the investor, when his/her portfolio size has become really large.
The rebalancing of asset allocation usually should be done on a half-year basis or once-in-a-year basis, but in case if the market goes up or down by more than 10%, or when the desired return from the particular asset is achieved, then also the asset allocation rebalancing should be done.
This is one of the factors one should follow when the market is in a freefall. When the market is falling, investors should go through the investment books especially from experienced authors like Warren Buffett, Charlie Munger, Benjamin Graham, and many others.
The falling market is the point of time where investors turn into traders or vice-versa. And hence, one should try to control his/her behavior during this situation and should try to remain as a long-term investor and should avoid any kind of doing experiments with the market.
With the reduction in the Covid-19 cases, speed-up of the vaccination pace in the country, and on account of the festive session, it is expected that the businesses are expected to report a significant quarter for the third quarter of FY22.
At this point in time, Long-term Investors are strictly advised to stick to their financial planning approach and should not take any impulsive calls like stopping SIPs, or exiting markets, etc. And most importantly, this kind of situation best reflects the risk profile of the investor and also presents an opportunity to assess it very well. An Investor should follow a disciplined manner of investment and should avoid any lumpsum investment in the current situation. The best investment method would be to follow a staggered manner of investment.
Originally Published On: https://blog.investyadnya.in/why-did-stock-market-fell-today/