InvestorQ : Are there some basic rules that we can follow to ensure we do not panic in markets?
Abhi Yadav made post

Are there some basic rules that we can follow to ensure we do not panic in markets?

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Abhi Yadav answered.
3 years ago
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First and foremost, you must remember that panic is not the third option. If your stop loss is hit, just cut your position. If you are convinced of the stock, don’t hurry till your next rule triggers. It is like you buy, sell or panic. Panic cannot be an option. You either stay or move out. Ponder no further.

In the investing world you either run with the hares or you hunt with the hounds. The herd mentality sounds quite simple and enticing, but it will never make you money. When everybody on the street knows about a strategy, how can you ever make money? Have you seen an investor profiting from a herd mentality. When the entire market panics, consult your rule book and buy. Nobody lost money buying at a bargain sale. When the herd panics, that is your golden opportunity. It is actually surprising why we never use the same rules of bargain buying that we use for home furniture for our stock purchases. After all, the value game is the same everywhere.

Finally, don’t be too eager to buy into penny stocks just because they give an illusion of value. More often than not, it is a value trap that you could be getting into. A panic is the time to buy value and quality, not to bargain for penny stocks. Cheap crap is crap anyway. Kingfisher and Deccan Chronicle are fundamentally flawed stocks. Even at peak of panic, they are worthless!

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