What to do in times like these?

The stock market has fallen more than 30% in less than one month; world GDP is expected to fall sharply; returns on debt funds are negative due to spike in yield, not to forget the NPA crisis which may come up in the future; lastly, the country is going through a 21-day lockdown which will affect demand as well as the livelihood of people. The imported Covid-19 is responsible for all the havoc throughout the world. Talking about India, investor portfolios are down by one third from their peak values with even five-year SIP returns turning negative. The current plunge in the markets has scared investors globally, but if we look back and analyze then we will realize that stock market crashes have happened in the past too and the markets have recovered from these crashes. The journey of our indices has not been a smooth one and so won't be ours but at the end of the day, the indices have managed to give us favorable inflation-adjusted returns and investors can hope that even their portfolios will reward them likewise in future.

The post today is to guide our readers as to what are the dos and don'ts during a crisis like this. We will try to answer questions relating to SIP stoppages, redemptions in deep losses, investing in alternative products and putting more money in equity!

Investors need to follow the following simple steps in order to pass through difficult times like these. Please remember that this is not the first time that the crash has come and won't be the last one either. 

Just don't do anything!

The first step to go through this phase of a stock market crash is to sit tight and do nothing at all. Chiefly, avoid looking at your investment portfolio for the next few months. Remember the long term goals which you swore by on the day you started your SIP or put in a lump sum amount in the markets. Continue with your current investment plan, continue your SIPs and just let the difficult time pass.

Don't Sell! Do buy if you have had plans to do so!

Most retail investors are always on the losing side of the market because a retail investor usually buys when the market in high and when the crash comes they are hit hard which makes them lose trust in the markets. Eventually, many investors sell their holdings at steep losses, vowing never to invest in market-linked instruments again. Well, we would like to advise our readers to never sell when the markets are at rock bottom. While we don't force you to put in more money as that's a function of will and availability but withdrawing money should be totally out of question. In this time you need to increase your investment horizon by a few years and continue investing in your SIPs to get the advantage of Rupee cost averaging.

For investors who were willing to invest before the onset of the fall, they should keep their plans intact but the investment in equities should be done in a staggered manner. Increasing the SIP amount does sound like a good investment decision.

Learn about other financial instruments

During times of market surge, there is overwhelming participation of the investors in direct equity as well as equity mutual funds. The five-year CAGR of 20% or more that some funds have shown in the past is definitely mouth-watering enough to forget other financial products which may offer a tad lower return but are comparatively better performers during difficult times. While we will talk about this in detail in a separate thread but investors should look at debt mutual funds & guaranteed return products of insurance companies in order to safeguard their portfolio from extreme shocks.

Investors also tend to overlook insurance needs during periods of market surge because the ballooning portfolio returns give enough assurance of the well being of the family in case of medical emergencies or death of the sole bread earner. One should think of buying a medical cover for the family and a life cover for the earning member to take care of contingencies in case the portfolio isn't in the condition of being liquidated.

Be in touch with your financial advisor

The need for a financial advisor in times like these is immense because an advisor is one who will act as your patience builder. An advisor may not have the predictive power to gauge the next move of the markets but he/she can definitely give you suggestions on how to get over what has happened and move on. Regular monitoring and suggesting changes in the portfolio is the task of the advisor which investors during the regular course of life may not be able to do. Talk to your advisor and know about what is happening in the financial markets, the reason for underperformance or overperformance of your portfolio and ask in case some rebalancing needs to be done in order to stem the downfall.


To end today's a post we would like to reiterate that market crashes are a part and parcel of participating in the markets. The present crash isn't the first one and won't be the last one. You need to be patient, stretch your investment horizons, invest in a staggered way and most importantly remain in touch with your financial advisor.

Please read and share our posts in your circle and contact us for any investment advisory services on finriseinvestment@gmail.com or +91-8568953926.

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