How to prepare for the market fall

Maybe this is an exaggeration, but being prepared for a fall is the most sensible thing to do.

Are we in a bubble?

Is the market too high?

Is the market going to fall? Will interest rates go up further?

Sadly, I do not have a reply to any of these questions.

However, I do think these questions are wrong.

What you need to know is that markets have their ups and downs…we need to be prepared for a 5% fall once every month, a 10% fall once in a year and a 30% fall once in 5 years and a 40% fall once in a decade. Maybe this is an exaggeration, but being prepared for a fall is the most sensible thing to do.

What can you do now to be prepared for a fall in the markets….

• If you have a surplus, pay off the Home Loan first! Interest rates are near the peak, if not the peak. If you can pay off 20% of the home loan, it should take care of the extra interest that you are going to pay over the next few years.
• Diversify your assets –it is always better to have a portfolio which has Indian equities, corporate debt, gold, international equities and gilt. Multi Asset funds fit this nicely, and reduce the risk of equity doing badly and gold doing well.
• Remember that nobody can predict the direction of the market, and how long it will remain down.
• Remember that sitting tight during tough times is one of the best ways to get a good return. Having spare cash for investing when the market is low is very difficult – but extremely rewarding. Learn to be patient.
• When markets are weak some of your past mistakes show up very harshly on your portfolio. Use this as an opportune time to sell the losers and invest more in shares (or mutual funds) that are doing well.
• Get a good advisor – ask around and you will find a lot of fingers pointing to the right resources. Talk to him/her and take your own time to finalize who should be your advisor.
• Sometimes the market could behave very abnormally – it could go up when you keep hearing bad news! This is because a lot of the information that you see is after a few insiders have already acted on that new information. It was new only for you!
• Pray well – it always helps in whatever activity that you take up, especially if you start investing.

Attending Bhajan sessions, going for a walk, running, swimming, training in say boxing – are all great ways to beat the market – getting prepared is surely a good goal to achieve first.