Over the course of time we have written several behavioral finance articles to share our knowledge with investors looking to create long term wealth. One can apply our Thinking Man advice from those articles with respect to the recent BSE Sensex crash. The sharp decline in the stock market has made everyone very tensed so here is a list of 3 things that one should avoid while investing in the stock market:
Avoid short term gains – Long term investments looking on the basis of long terms are the best forms of investment as the volatility in the market can be averaged out over time. In the shorter period although the probability of high risk is there, you are also at a very high risk.
Do not panic and sell – stock market crashes can significantly reduce the value of your investments but it is important to note that one must have faith in his / her stocks. One must also remember that it is a cycle and historical data always suggest that the markets always make a comeback.
Be careful of bandwagons. Do not buy or sell stocks just because a lot of people are doing the same. Make sure to use fundamentals while keeping your financial goals in mind before buying or selling stocks/funds. Different people have different risk appetites so one must not look to copy other people’s portfolios.
Thinking Man advice:
This stock market crash like always is a true test of an investors skills. Those who can avoid the above scenarios will most likely be the ones to emerge as winners when the markets eventually recover.