Consider Practical and actionable aspects during corrections to take advantage
Most of us as investors know that Volatility and corrections are part of the market
However when the real correction happens, we not only forget this wisdom and but also get nervous & panic. In that state of mind we worry about unknown and loose focus on the useful and profitable aspects. Every market correction was followed by a recovery.
Corrections are normal
we have seen 6 times Nifty correct by 15% or more over past 15 years
Highest was 60% Jan to October 2008
Lowest correction was 15% Aug to October 2018
Longest Correction was Nov 2010 to Dec 2011
Shortest correction was Feb to March 2020
This is known only in hindsight but unfortuanately most investors try to predict the duration of the correction or the depth, this often leads to frustration and anxiety as no once can predict these events. Instead it will be useful to take advantage by focusing on investing more at these times as corrections will end and markets will bounce.
The Real Drama is not in the index
In 2021 while Nifty500 was up 30.2%, average return of the top 25 stocks was 244%
average return of the bottom 25 stocks was -33%
in 2018 Nifty500 was down 3.4% (-), average return of top 25 stocks was +49%
average return of the bottom 25 stocks was -68%
after the correction phase, the returns in the next 12 months of the index tend to be very healthy.
Do no get perturbed, it is impossible to predict the duration and extent of the correction. It is best to use systematic approach to investing , continue your SIP and increase allocation to equity.
This is brief summary of an article written by Harshad Patwardhan for ET Wealth October 3-9, 2022
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