Most people have entered panic mode. Retail investors are hurling abuses at FIIs, the finance minister, P Chidambaram, the Securities and Exchange Board of India (SEBI) and everyone else who has caused panvati (curse) to the markets.
Those who are long on futures and holding call options, have had their wealth wiped out, instantly. But it is important to understand that we have a similar scenario every time there is a correction.
I always warn people that the markets can be very lethal if you enter without proper knowledge. But powered with knowledge, market corrections and falls are a great opportunity to create wealth.
You can rise in the fall!
A 1,400-point fall at the Sensex scares away speculative buyers and in turn makes things a lot cheaper. Many stocks today are being offered at discounted prices compared to their earlier highs.
Many of them still continue to have growing profits and in some cases even improved fundamentals. Some of the world’s richest investors have used market corrections and pessimism to buy cheap, and create their millions and billions in the long term.
Warren Buffet loves buying when others are pessimistic. Remember, people who create wealth do things that others don’t. When everyone panics and sells quality stocks, you can accumulate them at a lesser price. If you have a long-term perspective of at least one or two years you will create a lot of wealth.
So, what do you do?
Ignore those people who are busy spreading doomsday theories. Look back and you will see how the market keeps making a new high after every correction. Always keep some cash handy to make the most of these times.
No matter what the levels of the markets, undervalued companies will always exist. In fact, a few undervalued companies I have invested in, have become even cheaper now. This makes it all the more appealing for me to buy more.
Sos, make the most of such situations and I assure you, you will create a lot of wealth.
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