WHAT MUST I DO NOW?
This is the question probably every equity investor would have asked himself a number of times in the past few months.
With the stock market moving to dizzying heights before succumbing to gravity, it's easy to get nervous or over-excited.
Here's what we suggest you do when the bulls and bears kick up a lot of dust.
WHAT YOU MUST NOT DO
Don't panic
The market is volatile. Accept that. It will keep fluctuating. Don't panic.
Don't make huge investments
When the market dips, go ahead and buy some stocks. But don't invest huge amounts. Pick up the shares in stages. Pick a few stocks and invest in them gradually.
Don't chase performance
A stock does not become a good buy simply because its price has been rising phenomenally. Once investors start selling, the price will drop drastically.
Don't ignore expenses
When you buy and sell shares, you will have to pay a brokerage fee and a Securities Transaction Tax. This could nip into your profits specially if you are selling for small gains
WHAT YOU MUST DO
Get rid of the junk
Any shares you bought but no longer want to keep? If they are showing a profit, you could consider selling them. Even if they are not going to give you a substantial profit, it is time to dump them and utilise the money elsewhere if you no longer believe in them.Similarly with a dud fund; sell the units and deploy the money in a more fruitful investment.
Diversify
Don't just buy stocks in one sector. Make sure you are invested in stocks of various sectors.
Believe in your investment
Don't invest in shares based on a tip, no matter who gives it to you. Look at the fundamentals. Analyse the company and ask yourself if you want to be part of it.
Stick to your strategy
If you decided you only want 60% of all your investments in equity, don't over-exceed that limit because the stock market has been delivering great returns.
Stick to your allocation.