What to do when the Market gets a Collective Panic Attack? | Pints

There’s a lot of negative news around the stock market right now. It seems like 2022 and 2023 are going to be difficult years for the markets. So we were asking the question “What should I do, now that markets have crashed?”

Inflation, supply chain issues, gas prices, war, geopolitical firecrackers, political upheavals, a pandemic that doesn't seem to flatline - there are a LOT of things going crazy all around. The markets and the economy are not immune. All these crazy things have caused a collective panic and confusion among the masses. After all, markets are a reflection of reality and sentiments - both which seem very negative at the moment.

It is easy to feel like the world will end in an apocalyptic kaboom. But the reality is, the world has survived situations worse than these. So it will do so again. As individuals, we can't control all the variables - but we can still learn from it and improve our investing game.

One philosophy that's held true across decades is - Be fearful when others are greedy, and be greedy when others are fearful. This was said by none other than Warren Buffet. Of course, this does not mean that you bet your house and pile into the markets. What it simply means is that good investors act counter cyclical to the market mood. Investors should always be looking at the long term and market panic is a short term phenomenon, if you consider a 10 year horizon. The reason for this is, market movements are based on short-term events - sure there is inflation, but it wasn't there a year ago and will eventually fizzle out. So will wars and pandemics.

Many investors will want to 'time the market'. But there is no real way to do that - unless you have a crystal ball that can predict the exact date and time when markets will bottom and top out. As retail investors, the best game is to stay consistent - buy good stocks and stay invested through the ups and downs.

Some suggestions that may help you to tide over these crazy times:

1. Stay calm - panicking with the market is the worst thing one can do. In panic, investors sell at a loss, try to invest in short-term speculative ideas and burn even more capital. If your portfolio has stocks that you like and believe in as a business, then stay invested.

2. Save more - inflation is a very real thing. Your clothes, shoes, restaurant dinners - all cost more than they did 6 months ago. Choose wisely when you feel the urge to spend. It may hurt your feelings to downgrade your lifestyle - but this is merely temporary. Save as much cash as you can and practice some discipline.

3. Be frugal - sure, you can have the occasional cappuccino at that fancy coffee shop. But if you're taking a cup back to home or work, just pick a cheaper local coffee shop over a fancy coffee chain. Go bargain hunting and thrifting for clothes, shoes and other stuff. There should be no shame in choosing to save some money. You have worked hard for it, so don't give it up so easily.

4. Don't just read the news, understand it - Gloom and doom attracts more eyeballs. So news outlets will serve you news that sells. But take this time to learn about investing, concepts like inflation, monetary policy etc. The more you understand these concepts, the less you will be alarmed by the news around them.

5. Expand your horizons - we live in a hyper connected world. And we don't just mean watching TikTok videos of people from the other side of the planet.

Read more here: What kind of investor are you?