Market Advice: How to save portfolio during Share Market Fall. Watch Video

Publish Date: 26 May, 2022 |
 

During the down period of Share Markets, the investors tend to lose their money and to prevent the same they make mistakes, which in turn increase their loss amounts. The share market falls can be due to a huge number of reasons like GeoPolitical tensions, corrections, pandemics etc. It is important to save the portfolio as well as the hard-earned money invested in the share market for a common person. Here are a few points that can be kept in mind during the downside period of Share Market :

  1. Avoid Aggressive Averaging :

People usually tend to buy the shares that they have at a lesser value during the fall period. However, aggressively averaging is not a good option as it will still keep the average value for that particular share at a higher value than the lowest value it hit during the fall. 

For example : Consider these 2 scenarios in both of which Share A started to fall from 100 till 50 INR per share with a total fund available 40,000 INR (equal amount of shares bought each time):

  1. Aggressive Averaging : The share was average out at each point from 100, 90, 80, 70 and the average comes out to be : 85 INR per share.

  2. Now, if the shareholder would have waited to average out at a lower price say 60 and bought the 300 shares at 60 INR per share, the average would be 70 INR per share.

  1. Avoid Aggressive Buying :

Similar to Aggressive Averaging, aggressively buying the shares during the fall period might result in having bought the shares at a much higher price than they could have obtained. Avoid aggressively increasing the portfolio during the fall period and look out for an upward movement beginning in order to buy the new shares.


  1. Cut Down the Portfolio :

During a big drop in share market and limited fundings, the shareholders can cut down their portfolios between 30%-50% of the total value and use that amount to buy the shares at a lower price during the stabilization period of the share market, before it bounces back.


  1. Shorting / Buying Put :

The Options trading or shorting the stocks are a good option for shareholders with big portfolios. Buying Put will increase their money in multiples during a fall period and shorting their stocks i.e. selling out their stocks and booking profit at a higher level will prevent them from the losses in case of a sudden market fall.

  1. In case of a GeoPolitical Risk?

During the multi nation tensions or war like situations, the share markets gets affected and falls down aggressively. However, if a situation arises, the shareholders can let go of a few shares and invest in GOLD ETFs as the gold value will increase during such scenarios and will average out the loss that will happen due to market fall.

 

 

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