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Don’t lose sleep over bear markets

Every investor needs to look at their position in a specific manner and decide about the kind of attention they have to focus on it. Arnav Pandya tells more.
None | By Arnav Pandya
UPDATED ON JUL 10, 2008 08:19 PM IST

The position in the equity markets has taken many people by surprise. The sharp swings have market players worrying about the manner in which various price movements are taking place. There is a lot of concern among people managing investments about the way in which things will turn out.

Many investors also start to panic in such a situation but there is actually no reason for them to do so. Every investor needs to look at their position in a specific manner and decide about the kind of attention they have to focus on it.

No daily pressure
There is often a reason why several fund managers and other players act in a specific manner. This can be something as simple as dumping stocks when things fall more or even refusing to buy when things are likely to improve in the future. This is because they are often under pressure on a daily basis, which means that they have the daily net asset value or the client’s portfolio to worry about.

There is no daily pressure for the investor and such people are more likely to make the best out of a tough situation because they can make their decisions looking at a time just beyond tomorrow. With this kind of pressure absent for most investors they can look at things in a different light.

Funding position
Most people who manage other’s money will be dictated by conditions that are linked to the money being used. An investor in a mutual fund can pull out his money any time, and the fund manager might end up selling securities to meet the redemption pressure. A similar thing can happen with other managers but the situation need not be the same for a small investor.

As long as the investor has not borrowed the money for investing and has no immediate needs, there is little for him to worry about. This will help him move on to an independent path for the decision making process.

Don’t panic
First thing that a person should avoid is panic, because that creates the base for wrong decisions. As long as a person can afford to show some losses in terms of a fall in value, they are suited to invest in equities because they can rest easy and gain when things actually turn around.

If the tendency for the investor is to panic then there is a chance that the investor could end up selling investments when they should not be doing so and this can be a risky thing to do.

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