Investment Strategy in Stock Market, Key Lessons to Learn!
The year 2021 was dynamic in a stagnant way. By the end of 2020, we were hopeful of overcoming the storm of Covid-19. There was vaccination going around the world, and the world was witnessing a swift economic recovery. As soon as we saw the hope of stability, we got struck by the second wave, proving to be even more disastrous than the first one. There was the loss of lives, jobs, stability, and economic activities.
However, on the bright side, the market gained momentum positively. Equity markets, Sensex, and nifty all showed positive growth in 2021. Also, the number of people investing in stock markets, IPOs, trading, cryptocurrencies, etc., increased significantly over the past few years.
2021 has been a year where a lot was happening around the world. We had many lessons that could be learned from such an eventful year. We have composed a few meaningful investment strategies from which we can take inspiration for our investing journey and start stitching the perfect investment strategy.
1. Do not fall into the trap of ever-changing strategies
Our investment strategies need to evolve over time. We must be on the lookout for the next big thing and always be on our toes with the market situation. But it is not advised to make your strategies too volatile. It is important to stick with your investment strategy irrespective of the market conditions. Sometimes, an asset is worth growing, but it may show loss due to a highly sensitive market in the short term. Covid-19 struck the world with a big uncertainty about when will the world become normal again. In such a situation, sticking to the already performed strategy helps cope with the economic losses and reduces such losses.
A list of ways that together can make or break your investment strategy :
- Goal planning
- Asset allocation
- Systematic Investment Plans (SIPs)
- Portfolio rebalancing
These strategies are something that can be kept constant throughout the investment life. But one also needs to understand the growing markets. Small and mid-cap industries, for example, were showing no or very few returns during the past few years, but with Covid-19, they have shown positive growth and have given good returns to the investors. This is important to keep an eye on the market and the investment strategies planned. Thus, being patient and sticking to the investment strategy that keeps you going is one of the most important lessons from 2021.
2. Creating and maintaining an emergency fund
We have all tried to maintain some savings in the emergency fund and ended up exhausting it on other expenses. An emergency fund serves excellent in times of adversities. Covid-19 came with too many uncertainties. There was the loss of life, jobs, economic failures, and whatnot!
Let us say you were earning INR 1 lakh. You had a good lifestyle; you paid monthly EMIs on car and rent. You were able to invest and save too. Now suddenly, owing to Covid-19, you lost your job. Unless you don’t have over INR 6 lakhs in your emergency fund, you might cripple.
Thumb rule: Have at least 6 months worth of your salary parked in a liquid fund or in an investment avenue which can be easily liquidated without any loss of your capital. Emergency situations don’t come with an invitation, and hence it is important to be prepared for anything and everything.
3. Covid crash was not like other market crashes
The market crash that came with Covid wasn’t the first that the world witnessed, but the difference. In the past few years, we have seen Dot Com bust in the year 2000, the global financial crisis of 2008, and then the Covid crash of 2020. While the former two resulted from man-made disasters, Covid-19 was because of the natural calamities. The previous two hits pushed the market deep down and took years to gain recovery incurred in those losses. While the market crash due to Covid-19 was immense, it was short-lived. The market recovered within 5 months, and it was ready to be involved in full-grown investments again.
Thus, the biggest lesson learned from this situation was that not all crises are the same, and one must learn from the past but should not consider every situation the same.
Apart from those mentioned above, the biggest lesson that the pandemic taught us was to keep calm and keep moving. The world is changing every minute, and it is also becoming unpredictable. Thus, it is necessary to be updated with the market and investment strategies to minimize risks and maximize profits.
Be prepared for emergencies, make an appetite for risks and make well-informed decisions. With these golden rules, you’ll be able to fly high.
Don’t wait until it’s too late.
Start today and secure your future.