Financial Lesson From the Pandemic: Patience is the Key of Stock Market Profit!
Ever since the onset of the Covid-19 pandemic, the investment market has gone through a really tough time. Particularly, the equity market has followed a topsy-turvy path over the last two years with deep corrections and volatility. For instance, the key market indices hit their lowest value in decades in April 2020, when the country witnessed the first lockdown in its history. Those few weeks of April drained out nearly 35% of the investor’s wealth.
Such strong and steepest value erosion created uncertainty even for experts as they could not predict the future path that the market would follow. However, few predicted that the impact of Covid-19-induced lockdowns would take around 3-4 years for recovery. The growth which the market experienced in the post-pandemic era, shocked the analysts as it climbed a steep growth trajectory.
Moreover, the duration in which the market experienced changes- steep fall, consolidation, and fast recovery- was only 18 months. In fact, the market condition was much better than that of the pre-pandemic era, even after the country experienced the deadly second wave in 2021. By the end of the second wave, Indian investors increased their wealth multiple times by adding about 55% value to their wealth.
Impact of the Russia-Ukraine Conflict
The shift in market trends was not limited to the impact of lockdowns only. The Russia-Ukraine crisis played a crucial role in leading many western countries on the verge of inflation and an energy crisis.
As of now, European countries are going through a tough time due to fuel and food crises. The Russia-Ukraine crisis not only impacted the western countries but Indian market too faced issues due to the ongoing struggle in the global supply chain.
The major impact can be seen in food, and other essential commodities’ surged prices. For maintaining proper stocks of food in the country, the government has recently banned the export of rice. All these factors compositely hint at the possibility of a financial crisis in the country.
Well, the Indian equity market has experienced a lot of changes in the past few months; some have created manifold wealth for themselves, while some have lost all of their wealth. So, in this scenario, we must learn about the mistakes we should avoid while investing in stock or other commodity markets.
Financial Lessons From The Pandemic
Panic is a wealth drainer
From the beginning of our school days, a lesson we all learned from our textbooks is that we should avoid making decisions in a situation of panic. The same tenet applies to the investment markets as well.
During the first wave of the Covid-19 pandemic, many investors chose to exit the market forever. In contrast to them, individuals who treated downfall as an opportunity manifolded their wealth. Thus we should work on our mindset to turn pandemics into opportunities for us.
Perseverance lead to great miracle
The tagline is from a phrase quoted by the Missile Man of India, Dr A P J Abdul Kalam. In every field, it is observed that people are enthused about getting results instantly. However, only a few of them show the courage to wait for some time. The trading and investing world demand patience and time, as you can’t double up your wealth in a single day.
You need to spend some time diving into the ocean of wealth management. Lack of patience in your attitude increases your chances that you will lose your wealth easily. The same thing happened with investors during the pandemic era. They exited the market or invested in stock/commodities without knowing the background. Thus they ended up facing loss.
Volatility is the other name of opportunity
Volatile times are the best time to invest in assets at lower costs. Hence, we should treat volatile times as an opportunity to build long-term wealth. Additionally, a downfall in the market adds dynamism which is helpful for earning higher returns in low-cost investments.
The strategy to make dip investments through additional purchases adds punch in your investment by significantly reducing your investment cost. It is noteworthy that long-term wealth creation requires purchasing at lower price values. The downfall in market conditions offers favourable conditions to accumulate assets for the long term.
Corrections are temporary
Withdrawing your investment because of temporary downfalls is not a wise decision which you should make. Withdrawal of your investment is only reasonable when you are in dire need of capital or observing a downfall in the market due to major changes in the policies or other global impacts. It is because various market cycles involve corrections, volatility and steep upward motions in the market chain. Hence, if you act on small advances, it can get you in trouble in the long run.
Asset allocation is a helping hand
Usually, it is observed that investors enter into the world of investing without any strategy. Rather you should first prepare and adopt an asset allocation strategy that will reduce your chances to face loss due to concentrated investment in any stock or commodity. This strategy is a historically proven one that could keep you free from market-related stress.