Uncertainties in the stock market make investors determine their risk profile before investing. National or international crises, like pandemics, Russia/Ukraine war, etc., lead to the bear market phase.
What is a Bear Market?
A bear market is a phase in which the stock market experiences prolonged price plunges. When there is a drop above 20% or more from the recent peak amid widespread pessimism is believed to be a bear market. As a result, Investors lose confidence in the market investments.
Most investors find it challenging to deal with a bear market and follow their investment approaches. It is more difficult if they want to deal with it emotionally. Due to negative headlines about the stock market volatility, investor behaviour may emerge into bad trades.
Mistakes investors make in the Bear Market.
Investors open demat accounts in the hope of quick and significant returns, Successful investing is not only a result of good decisions but avoiding poor ones also. Bear markets offer many opportunities to create significant wealth, but it doesn’t mean you can dive headfirst into the deep without a plan. Investors can tilt the investing scales in their favour with prudent decisions and avoiding a few common mistakes.
Here are five common mistakes to be avoided during a bear market.
1. A Believe that a Bear Market Needs to Act
Investors feel awful when the stock market falls because they see their portfolio values dip. Many feel it irresponsible to sit back and watch, doing nothing. They want to do something where that something usually means selling. The steeper the fall, the more difficult it is to avoid negative emotions. You must prevent such negative sentiments, especially if your portfolio is properly allocated before the crisis. It means it is low-cost and well-diversified that can handle significant changes. Selling or making changes during a bear market may end up in permanent losses on the positions that have the potential to offer high returns in the upward market situation. You should remember the basic rule – buy when prices are low. It is not about selling when prices are low.
2. Looking at Your Portfolio Too Often
Monitoring your portfolio is a good habit. But it turns into a bad thing during circumstances that may lead to a bear market. The problem occurs when investors log in every day just to view their portfolio balances, even when they know any change would go against their investment. It is just another activity that can perpetuate you to do something during an emotional roller coaster ride
3. Consuming Too Much News
News platforms have one goal in mind: drive ratings. Their repeated news creates fear and makes most investors stay glued to their TVs and phones for the latest update or say to see it as a big crisis. Exaggerate headlines can make things worse than they really are. You should understand that some reporting may be a good piece of advice, but they are not held in the best interest. You may ultimately hurt your investments in the long run. Therefore, stop reading the headlines on your stock trading India app. Better to read more articles to understand the market behaviour that can lead to better yields even during such a downturn.
4. Pulling Back from Long-Term Investing Strategy
The stock market is known for significant returns with a long-term investing strategy. After a correction or bear market, many investors get tempted to ditch their long-term investments. It shifts your focus from achieving your investing goals. In such adverse market situations also, it is important to stay focused on their long-term strategies.
5. Time the Market
Many investors try to guess whether the market will continue to decline. With this thought, they attempt to time the market. It is a difficult task even for experienced investors, if not impossible. Instead, you should continue to invest for the long term, which can easily ride out the market’s highs and lows.
Thus, finding the available opportunities to make profits in the bear market instead of making hasty decisions leads to losses. If you want to enter in Indian share market and invest in the stock market, you need to gain some basic knowledge about the market.