What to do when Stock Markets Crash! ?

I’m really excited about the opportunity the current stock market crash is providing to create wealth. At present we might be in one of the biggest correction of all time. Many of us have this question: “What to do when Stock markets crash! ?” And, I’ll try to answer this in this post.

Market Trend Analysis

The longest Bull runs of recent times, which started in March 2009, seems to have come to an end (About which, I had cautioned my readers in this post , before the sell off started). As on 9th March: The Sensex & Nifty has lost 8.6% and 8.45% since their peak in Jan 2018.

Sensex historic trend analysis, since 2000:

  • Bull Run : From Feb 2003 to Jan 2008: Sensex rose from 2904 to 21206, gaining whooping 730 % in 57 months.
  • Bear Run / Crash : From Jan 2008 to Oct 2008, Sensex lost 63% (- 63 %) in 9 months.
  • Bull Run : From Oct 2008 to Jan 2018: Sensex rose from 7697 to 36443, gaining whooping 473% in 110 months.
  • Bear Run / Crash : From Jan 2018 to Oct 2018? (only time will tell)

What triggers a Market Crash ?

There are lot of parameters that will lead to market crash. But, we can never predict a crash through some data. Though, eventually “experts” will be able to attribute the crash to some cause, pointing to some charts and trends. But, if you ask me, I’d say, “Markets crash, once in a while, to make people like you and me wealthy !!”

What should a long term investor do?

The correction has just begun, it will go for few months before the trend reverses. So, be very thoughtful about what you are going to do.

Make sure to have enough cash to buy during dips. You may get opportunity to invest in your favourite company, which you were not till now, due to its premium price.

If you haven’t booked your profits yet, consider doing it, if your investments have grown in value considerably since you purchased. So that you can buy the stock at a lower price, while the markets correct.

There are few companies, which survive crash, whose share price drop are negligible or nil. If you have holding in such companies, just stay invested.

If your investments have dropped considerably during the current correction, and you believe that the company is good and the drop is due to current market situation. Don’t panic and sell off, instead just stay invested or better yet, buy more shares at dips.

Remember the Persian adage, “This too shall pass”