Some steps that investors should take in the situation of crisis

Published: Tuesday, August 23, 2011, 16:34 [IST]

Some steps investors should take during crisis

Go back to the basics of investing
Markets may fluctuate in short term, stocks of companies may suffer because of market, but remember at the end of the day, stocks prices go up and down based on the expected earnings in future. This expectation is set by many factors of which past earning growth are the most important one. If the company in question doesn't have any apparent impact because of these crises, the investors need not worry about the temporary fall in the prices. Market punishes all for chaos and confusion but the punishment is temporary for companies that have great fundamentals, a scalable business model, encouraging performance, and a sound management.

We are fortunate to have a very recent crisis in 2008 where we saw temporary crash in the market but most of the companies that fulfil the criteria mentioned above bounced back with the same intensity.

Don"t forget the history of returns
If you look at history of returns in long term, equity has beaten down every other asset by a big margin. This fact doesn"t change even now. We tend to forget this fundamental observation that equities outperform all other assets. BSE Sensex has given a CAGR of 16% in last 12-14 years.
If you are afraid to invest in equities, invest in equity diversified mutual fund after due analysis of it.