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Do this one thing to face market down turns with confidence

Everyone is worried about the state of the markets. It’s difficult to watch your investments reduce in value.

Everyone is worried about the state of the markets. It’s difficult to watch your investments reduce in value. 

One important factor in this, and one which is challenging for everyone (me included!) to deal with is that growth of our investments is slow because they are made in small amounts over time, but a market down turn is applied on the accumulated amount and the change in amount is large. (Even an upswing is applied to the accumulated amount but we never worry about our money increasing!)

This behaviour is known to all of us who invest in equities but the emotional challenge doesn’t go away. But we also know that all of your money needs to be invested to take advantage of the upswing when it happens. As the mountain dew ad used to say "dar ke agey jeet hai" :)

One thing I started practicing a long time ago and which personally helps me face market downswings is having a significant sized emergency fund. It eliminates the concern that I won't have money when I need it. 

One thing I started practicing a long time ago and which personally helps me face market downswings is having a significant sized emergency fund. It eliminates the concern that I won't have money when I need it. 

You should have about 4 months of your Salary in your Emergency Fund. So, if all of your SIPs are in Equity and you don’t have a large enough Emergency Fund, you should split your SIP for a few months so that some of it goes into your Emergency Fund. Once you reach the target amount, you will be able to invest into Equities with more confidence.

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