Market crash: What should you do now?

WHEN the going gets tough, the tough get going.
-- Billy Ocean, singer.

That really sums up what it takes for a retail investor to survive in these volatile times -- nerves of steel and lots of courage. If you have poured in a substantial amount of your savings in equity shares or equity mutual funds, and are crumbling under the pressure of the falling markets, all is not lost. We spoke to some of the best financial advisors in the country and they tell you why you should simply not worry!

Stay put for the long-term
Our experts have said it before and they say it again -- equities are for the long term. Certified Financial Planner Gaurav Mashruwala says, "Anyone who has been investing for the long-term should not be affected by the market fluctuations. By long-term I mean seven to nine years."

Financial advisor Sanjay Matai elaborates by saying, "People should continue holding their investments. The current fall has been too sharp and it will take some time for the market to recover. The pain will be longer this time but the market will recover."

Remember: a loss is not a loss, till you sell. So, do not panic by simply looking at the notional loss. Hold on to your investments and watch them turn to profits in the long run.

Why the 'long-term' argument pays
Some number crunching supports this. If you had invested in the BSE Sensex for a one-year period between 1979 and 2005, in 10 out of those 26 years, you would have lost money (see table).

But if you had stayed invested for more than 10 years, your chances of loss would be almost zero. And that too, you would have made an average return of 17 to 18 per cent per annum.

For those who thought equity was a place to make a quick buck, it is time to revisit this belief. If your goals are any shorter than five to seven years, then you should evaluate your investment avenues. Debt is a better bet for short-term investments when you are looking at steady returns.

Source: MoneyControl