Don't let panic ruin your wealth.
Avoiding these mistakes can save you from HUGE losses, says Ramalingam Kalirajan
The stock market has been full of surprises lately, hasn't it?
One moment, it feels like it's climbing to new heights, and the next, it's spiralling downward.
It's enough to make any investor pause and wonder: What's really going on?
With the Nifty taking a sharp tumble of over 3,000 points from its all-time high witnessed last September, it seems like the market just can't settle down.
But here's the real question: How do you make sense of all this noise?
We're dealing with weaker-than-expected corporate earnings and whispers about RBI cutting interest rates.
Does this mean it's time to rethink your strategy? Or should you stay the course, knowing volatility is part of the journey?
If these questions are swirling in your mind, you're not alone.
Let's unpack the situation and figure out how to keep your investments on track despite the turbulence.
1. Are You Letting Panic Drive Your Decisions?
Do you find yourself overwhelmed with anxiety when the market takes a nosedive?
This is a common reaction, but selling investments out of panic is one of the biggest mistakes investors can make.
While the value of your portfolio may decline during a market downturn, these losses are only on paper unless you decide to actually sell your portfolio.
By redeeming investments at a loss, you turn a temporary dip into a permanent setback.
Instead, ask yourself: Has there ever been a downturn that the market didn't eventually recover from?
History shows that patience is often rewarded in the stock market.
Maintaining a long-term perspective can help you ride out short-term fluctuations.
2. Should You Hit Pause on Your SIPs?
When the market is in free fall, does continuing your Systematic Investment Plan (SIP) feel like throwing good money after bad?
While this concern is natural, pausing SIPs during a downturn can actually hurt your long-term returns.
SIPs work best in volatile markets due to the principle of rupee cost averaging.
Here's how it works: When markets fall, the net asset value (NAV) of mutual funds declines.
This means your fixed SIP amount buys more units during market dips, effectively lowering your average cost over time.
So instead of pausing SIPs, ask yourself: Isn't this an opportunity to accumulate more units at attractive prices?
3. Are You Trying to Catch the Bottom?
Do you find it tempting to buy stocks when their prices have dropped sharply? Known as bottom fishing, this strategy involves buying stocks that appear undervalued after a steep decline.
While it may sound like a smart move, the reality is that predicting market bottoms is as challenging as timing the market itself.
Unless you have in-depth knowledge and resources to analyse individual stocks, this approach can lead to poor investment choices.
Rather than gambling on 'cheap' stocks based on tips or hearsay, consider investing in mutual funds.
Professional fund managers carefully research and diversify portfolios to mitigate risks and maximise returns.
4. Can You Really Time the Market?
How often do you hear about investors waiting for the 'right time' to invest?
Market timing -- trying to predict highs and lows to optimise entry and exit points -- is an alluring concept.
However, even seasoned professionals struggle to consistently time the market.
Instead, focus on staying invested for the long term.
Time spent in the market allows compounding to work its magic, often leading to significantly higher wealth creation compared to frequent buying and selling.
Ask yourself: Why risk missing out on long-term growth for the illusion of short-term gains?
5. Are You Following the Herd?
Do you find yourself buying or selling simply because 'everyone else is doing it'?
Herd mentality is a powerful psychological bias that often leads to irrational investment decisions.
Following the crowd can amplify volatility and cause you to deviate from your financial objectives.
The next time you feel compelled to follow the herd, pause and ask: Does this align with my goals, or am I just reacting to market noise?
Staying focused on your long-term strategy will help you make more rational and informed decisions.
6. Is Your Portfolio Properly Diversified?
Are you putting all your eggs in one basket?
Concentrating your investments in a single asset class, sector, or stock increases your vulnerability to market fluctuations.
Historical data shows that different asset classes perform differently in varying market conditions.
For example, while small and mid-cap stocks may excel in bull markets, large-cap stocks often provide stability during volatile periods.
A well-diversified portfolio -- spanning equities, fixed income, and even alternative investments -- can help reduce overall risk and provide a cushion against market swings.
Asset allocation tailored to your financial goals and risk tolerance is essential for long-term success.
7. Are You Giving Credence to Rumours?
How often do you come across sensational headlines or market rumours?
In volatile times, it's easy to get swayed by unverified information, whether it's about a major policy change or an impending market crash.
Social media often amplifies such rumours, creating unnecessary panic or excitement.
Instead of reacting impulsively, take a step back and ask: is this information credible?
Base your decisions on verified data and consult with financial experts when needed. A disciplined approach to information processing can save you from costly mistakes.
8. Do You Understand the Difference Between Volatility and Loss?
Do you mistake short-term market fluctuations for a permanent loss of capital?
Price volatility is a natural part of investing, reflecting temporary shifts in market sentiment.
Losses, on the other hand, occur only when you sell at a lower price than you bought.
By staying invested through downturns, you allow your portfolio the chance to recover and grow when markets stabilise.
The distinction between volatility and actual loss is crucial for maintaining perspective during challenging times.
9. Why a Certified Financial Planner Can Be Your Best Ally
Navigating volatile markets can be daunting, but do you need to go it alone?
A Certified Financial Planner (CFP) or trusted financial advisor can provide personalized advice based on your unique goals, risk appetite, and financial situation.
They can help you avoid emotional decisions, ensure proper asset allocation, and guide you through market uncertainty with confidence.
A skilled planner acts as both a coach and a partner, empowering you to make informed decisions that align with your long-term objectives.
Wouldn't it be reassuring to have an expert by your side during turbulent times?
Final Thoughts
Market volatility may seem intimidating, but it's also an opportunity to strengthen your financial discipline.
By avoiding common mistakes -- such as panic selling, halting SIPs, or chasing market rumours -- you can navigate uncertainty with calm and focused mind-set.
Discipline, patience, and professional guidance are your greatest allies during turbulent times.
So the next time the market wobbles, ask yourself: Am I making decisions rooted in fear, or am I staying true to my financial goals?
- You can ask rediffGURU Ramalingam Kalirajan your questions HERE.
Ramalingam K, an MBA in Finance, is a Certified Financial Planner. He is the Director and Chief Financial Planner at holisticinvestment, a leading financial planning and wealth management company.
Disclaimer: This article is meant for information purposes only. This article and information do not constitute a distribution, an endorsement, an investment advice, an offer to buy or sell or the solicitation of an offer to buy or sell any securities/schemes or any other financial products/investment products mentioned in this article to influence the opinion or behaviour of the investors/recipients.
Any use of the information/any investment and investment related decisions of the investors/recipients are at their sole discretion and risk. Any advice herein is made on a general basis and does not take into account the specific investment objectives of the specific person or group of persons. Opinions expressed herein are subject to change without notice.
© 2025