Welcome Finance Enthusiasts !!

The first thing to do when the stock markets are falling is to not panic. The equity portfolio held by an investor will be in red but the markets have their cycle of correction and bounce back. In the journey of investing, there always comes a time when your fear of capital wipeout clouds your judgment and you liquidate all your investments. That step is a big NO!!

The point to carry on with the portfolio is that the market value of your investment has come down temporarily. Once the market is corrected the portfolio will be green again. The same logic applies to equity mutual funds. The main objective of the Fund manager is to safeguard the investor’s capital and gains. In the scenario of mutual fund investment, you can sit back and relax because to keep your money secured is the fund manager’s headache.

Below are the three investment options when the bears take over the stock market. To safeguard oneself during the stock market crash, equity investment and the below options should be done simultaneously. So that if one portfolio goes red the other one stays green.

1. Debt/Commodity/Balanced Advantage Mutual Funds – Mutual Funds are the most common investment option via Systematic Investment Plan (SIP). However, there are many categories of mutual funds, the funds which invest their 90% of corpus in stocks are called equity mutual funds. The approach for equity mutual funds is mentioned in the introduction part. One should have at least two mutual funds as per their risk appetite. Apart from equity mutual funds, an investor should explore either debt/commodity/balanced advantage funds. Debt funds are highly liquid and safe because they invest in government securities and cash. Commodity mutual funds invest in the bullion market and time the increase and decrease in the price of commodities. For eg, Gold MF invests in Gold ETFs and tracks the price of gold to generate returns. Balanced Advantage funds as the name suggests balance the portfolio as per the market and economic situation. If the markets are bull-run and overpriced, the fund manager focuses on debt securities. If the market is falling they will buy stocks.

2. Fixed Deposit – You all might think this an investment option suited for our grandfather’s generation but I genuinely believe FDs are a good way to keep your money safe. The interest rates on FD have considerably come down but are highly liquid. If the Bank/NBFC/Financial Institution mobile app allows you to book and close FD from anywhere anytime, then there is no harm in keeping some money aside in FDs. The FD can also function as an emergency fund. If you opt for FD options in Companies and NBFCs kindly go through the Credit Scores. A Credit Score is given to the lending institution by assessing their financials. The highest credit score is AAA which projects higher reliability.

3. Buy the Dip – Buying the dip is the stock market strategy, in which you buy the stock when the price comes down. It is like buying clothes on Sale or discounted offers. Timing the stock market is a mammoth task, it requires keeping tabs on all worldwide Indexes, global news, market sentiments, political and geological economics, and the list can go on and on. Buying stocks at a low price does not mean that the stock has lost its value, the stock goes through a market correction. Market correction means where the market price justifies the intrinsic value of the stock.

An important investment tip is “Never keep your eggs in one basket, ” meaning never keep all your money in one Fund House, Bank, or Financial Institution. Diversifying the funds is a way to protect your money in the unforeseen situation of the collapse of an organization.