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What should investors do during uncertain geopolitical situation

05 Jan 2023

There is a very famous quote by legendary investor Warren Buffet - “ Be fearful when others are greedy, and greedy when others are fearful.” Unfortunately, this investing hack is hard to execute when the opportunity presents itself. For instance, we saw the world come to a standstill in 2020 during the Covid-crisis. The ones who invested then when others were fearful made high returns after the markets recovered the following year. But most investors remained on the sidelines as the situation was tough to gauge. We find ourselves in a similar situation where the world is worried about the ongoing war between Russia and Ukraine. But does this mean you invest lumpsum amounts immediately? Not quite. There is a simple route through this chaos - staggering your investments.

Go the SIP route

The ideal way to navigate this uncertain phase of the market is through Systematic Investment Plans. This is because the situation is still ongoing and could continue to affect the markets. Yet, you may want to take advantage of any dips that the markets provide without risking a large amount of your capital. By going the SIP route, you get 2 main benefits:

  1. Averaging out your purchase price: By staggering your investments over the period of months, you can take advantage of significant fall in prices and average out your cost. This way, you won’t risk all your capital in one go and at the same time, won’t miss out on any opportunities provided by the markets.
  2. Long Term mentality: Continuing with your SIPs will inculcate a disciplined, long term mentality with regards to your investments. This means short term volatility will not affect your mental health as much. Hence, you will make fewer rash decisions and a longer time horizon will ensure that your investments have substantial time for fruition.

It is easy to get caught on the sidelines and let a few months pass by during this uncertain period in geopolitics. There is no harm in capital preservation. Yet, if you do want to take advantage of these kinds of market dips, the ideal way to do so is through Systematic Investment Plans

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The stock market in India is likely to do well over the long run as the fundamentals remain strong. Low debt-equity, healthy balance sheets, better ROEs and well capitalised banks are pointing at strong earnings growth numbers. Hence, if you have a long term outlook, you will view this volatility as an opportunity. You can learn about terms such as share equity, equity capital, stockholders equity, total shareholders equity, and a lot more  here. You can also consider taking a look at the MO Investor App and the MO Trader App, depending on your area of interest. Always remember to do your own research or take the help of a financial advisor whenever in doubt.

Related Articles: Follow these 5 Expert Advices to Get Started with Investing | 5 Rules Every New Investor Must Know Before Investing | 6 Stock Market Investing Disasters To Stay Away From |  10 common mistakes made by SIP investors | 4 Smart Must-Follow Investment Tips for Beginners in India

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