Skip to main content

What to do when the market corrects?

Since, the markets are choppy and most of the stocks in the mid-cap universe are correcting, the question at the top of the mind is, what can be done to protect our capital? Well, there are three approaches that can work and I am listing them here.

1. Sell - This is the simplest of the propositions, but one of the toughest things to do from a behavioral perspective. If you have stocks that are fundamentally weak and you had bought them to take short terms profits in it, then it is better to sell them, even if it means that you need to take a small(or large) loss. However, if you are convinced about the business and future prospects of the company, then corrections are good opportunities to buy into the stock.


2. Short Sell - Active traders can think of this approach. Sell the stocks you have in your DP and buy it back at a lower price. That way your net position on the stock is not changed but you make some money on the way down.

3. Buy Puts - Again, this is for high risk traders. They can profit from buying puts (or selling calls) in a bearish market.

So, you don't need to lose your sleep when the market corrects. Make money even if the market goes down.

Comments

Popular posts from this blog

Review: My new ebook reader - Infibeam PI

I bought a new ebook reader. It is the Infibeam PI (www.infibeam.com/PI) . I have seen and used both the Amazon Kindle and Sony ebook reader. The main reason I selected the PI is because it was available in India. I did not have to wait for weeks to get my hands on it.

I will not go into detailed comparisons between the three readers I have used. The reason I bought the ebook is to read books. Although that sounds rather a stupid thing to say, I found some features on Kindle quite superfluous to book reading. Like the space consuming keyboard. I dont know of any book which comes with a keyboard, so why should an ebook come with one. If I have to surf the net, I will use my laptop to do it.

The whole buying process was easy and seamless. Delivery happened within 3 working days. The only regret I had was my father was not there to see this. He was pretty excited with the concept of an ebook reader and I had entrusted him with the duty of checking the condition of the parcel when it arrive…

Book Review: Let's Do Lunch by Roger Wilson

I read this book sometime back as part of my journey of understanding food and how it affects the body and mind. In the last two years I have managed to lose about 10kgs of weight and in the process have learnt a fair deal about food, although not enough to talk authoritatively with a nutritionist.

Roger Wilson's book deals mainly about how the author lost a significant amount of weight himself after trying his own diet plan. The diet he followed was eating fruits and proteins. His lack of fundamental knowledge of nutrition makes his commentary a suspect from the very beginning. This book is more a chronicle of the authors weight loss journey than a guide to healthy eating.


Conclusion: Better to avoid.