Kavan Choksi Discusses How to Invest During Market Downturns

Kavan Choksi Discusses How to Invest During Market Downturns

No one likes watching the value of their portfolio decline day after day. It is only natural for investors to be concerned about market downturns. However, selling off assets when prices are at rock bottom is rarely the right move. As Kavan Choksi points out, the typical reaction of investors to a crisis is to panic and start selling their investments, even if they end up incurring a loss. However, the decision to sell in a panic is often the wrong one. Investors must try their best to keep their emotions in check and maintain a rational approach to investing.

Kavan Choksi sheds light on the investment approach to maintain for market downturns

It is not an easy endeavor to make investments during a market downturn. However, it is also important to understand that economic turbulence like recession often presents unique opportunities for savvy investors to capitalize on undervalued assets and position themselves for long-term growth. Market downturns are characterized by a sustained decline in stock prices and overall market sentiment. Here are some approaches investors can follow to thrive during such times:

  • Diversify the portfolio. In many ways, diversification is a fundamental principle of investing. It especially becomes critical during market downturns. Investors can reduce risk and minimize the impact of a single market downturn on their portfolio by spreading investments across different asset classes, industries, and geographic regions. Buying a mix of stocks, bonds, real estate and gold would be a good way to diversify the portfolio.
  • Dollar-cost averaging: This is an investment strategy under which one has to invest a fixed amount of money at regular intervals, no matter the market conditions. This approach allows investors to buy greater shares when prices are low and fewer shares when prices are high.  Such a strategy can help investors to accumulate more shares at lower average costs over time, potentially leading to improved returns over the long term.
  • Identify value stocks: Market downturns might lead to undervalued stocks with strong growth potential and fundamentals. It is vital to carry out proper research to identify the right companies with promising long-term prospects, competitive advantages, and sound financials.  It would be prudent to invest in companies with strong balance sheets, low debt levels, and sustainable business models. Choosing to invest in value stocks during a downturn can ultimately yield considerable returns when the market eventually rebounds.
  • Consider dividend stocks: Dividend-paying stocks can become a valuable source of income during a market downturn. Companies that have a history of stable dividends are often more resilient even during economically turbulent conditions. Reinvesting dividends back into the stock can help investors to compound returns over time.
  • Focus on quality bonds: Bonds are usually considered to be a relatively safer investment as opposed to stocks, especially during market downturns. Both government bonds and corporate bonds can act as a buffer against stock market volatility.

As per Kavan Choksi, it would be a good idea for investors to review and rebalance their investment portfolio on a regular basis for the purpose of desired asset allocation. Certain investments may experience larger declines than others during a downturn. Hence, rebalancing is needed to purchase sets that have become relatively cheaper and sell off assets whose prices have gone up.

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