Zerodha co-founder Nithin Kamath shared his advice for post pandemic investors as the current market correction sparks panic. Kamath termed this market fall as the first real market correction since the outbreak of covid-19. In a LinkedIn post, Kamath exclaimed about the cyclical nature of the markets, claiming that given the way our markets went up from late 2020, this fall was inevitable.
Kamath also noted that an increasing number of retail investors are stopping their SIPs. He advised the investors against doing so and urged them to remain patient, saying that an SIP helps you to average your investments across different market cycles.
“You averaged on your way up from 2021; now, you get to average on the way down. In 2020, large, mid, and small caps fell by 25-40% but then rose by 200-400%. If you had panicked, you would have missed the rebound. As long as you invest regularly in the right funds, diversify, and stay disciplined, your chances of long-term success are high,” Kamath wrote in his post.
Avoid Leverage
Kamath stated that there will always be businesses who will compel and convince you to borrow money to invest, but it is a bad idea and investors should strictly avoid it. The brokerage firm co-founder stated that nobody has an idea of where the market is heading, including him and the businesses that offer investors leverage. The only thing an investor can do is to not panic as you can get pushed to panic if you have borrowed.
“You are better off just investing every month and doing something useful in life than getting carried away by the doom and gloom,” Kamath added.
Notably, small-cap and mid-cap stocks have faced their sharpest decline since the March 2020 COVID-19 market downturn, resulting in significant losses for retail investors. In February, heavy selling pressure severely impacted the broader market, with the BSE Smallcap Index dropping 14%, marking its first double-digit monthly decline since the pandemic, while the Nifty Midcap 100 fell by 10.8%.
