The market has gone down by 11 and half points today. The down turn is continuing. The volume is also not so impressive. Why so and what we could do?
Investor psychology is governed by fear. The reasons could be many. Among them, I have listed below a few:
1. Fear due to Nakkali Share certificate factor. Particularly, it has influenced in decrease of demand.
2. Selling pressure due to desire to clear shares in BT. IT has increased the supply.
3. Political pendulum moving fast in either direction heralding longer time for fluid situation. The agitation factor creating some type of nervousness.
4. Some brokers are out of business for quite sometime and their clients are in wait and see situation creating defensive environment.
Moreover, also there is, in general, a seasonal effect as this is a dull period historically. The dividend season is over and declaration time is quite far away.
Who is on fire? Certainly the small traders. Those who could not hold or do not dare to increase either money or number of shares will suffer most. Every major down turn throws a few traders out of business. This is too bad but a reality.
For long term investors, there is always another day, another time. They could bear the loss in paper and could wait. This is neither financial crisis at macro level nor a company's collapse at micro level. Economy is performing okay and a large majority of the companies are performing well. Hence, the turn around is certain.
There are three probable options.
1. Hold if you are investors and turn to be investors, if you are traders and again hold.
2. We never know what happens next. Simply we could do probability assessment and take decisions accordingly. If we really believe that turn around is certain, to earn more, movement is necessary. Therefore, we could invest today or even sell part of our shares right now and keep cash ready to buy more number of shares some days down the line anticipating that for some time bear would rule the market. Holders are relatively safe but are not better than risk taking/entrepreneurial investors or skilled/ courageous traders.
3. Continue to be fearful, be restless, carried away by rumors and pray for peace of mind as well as for safety of your investment.
The third option is not at all for people, who are in business that takes place in share market.
We should devise strategies and develop skills necessary to earn in both types of market situations - bull and bear. How that could be done is altogether different to different individuals and, thus, their performance is different. Now, social Darwinism is in full play. Only fittest could survive and even flourish. We are in a hostile terrain, let's acknowledge this fact and proceed ahead.
If we really believe that we lack that extra courage, temperament, skill and attitude, let's use the reverse gear, leave the share market and do something suitable to our attitude, skill and temperament. Peace of mind and harmony between our temperament and area of actions are more important than being in certain occupational stereotypes. This advice is not for our friends, who are silent/passive small investors for years, who applied in IPO, got some shares and are keeping that in their boxes. This advice is for active investors/traders.
We could not control or even influence the political course. Hence, we have to operate in an given political environment.
The surprising factor here is the role and actions of the regulators of the share market. They are doing nothing in implementing CDS, which could rectify many wrongdoings in the market. Here, the investor community in general, and the Investors Forums in particular, could play a role. Therefore, through this note, I request friends in the Investors Forums to take lead role in clearing the mess from the market by pressurizing the regulating authorities to implement CDS.
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