Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 349

Shaken by stock market carnage? Forget everything

All I am reading and hearing all around is this. Volatility is your friend. Stick to the long term. Don’t touch your portfolio. Keep some cash. Invest that in a staggered manner. Recheck your asset allocation. Shuffle your stock portfolio. Don’t borrow to invest. Don’t speculate. Quickly search for new stock ideas. Stop watching news.

Well, let’s cut it all.

The markets are sneezing bad, and your portfolio may be in a sea of red on account of the big recent declines.

Amidst this, what can you do?

Rue your losses and hold on to them? Sell your winners so that you don’t lose your paper profits? Become greedy because others are fearful? Become fearful because others are fearful? By the way, who are these others anyways?

Things look so confusing out there. And so are all kinds of advice that is floating in the news and social media. Everyone is out there to remind you of how dumb you have been and how smart they are. Stop there!

Here’s something simpler, very soothing to the soul, and very effective too, that I advise you to do now. This is the exact same advice I’ve given to myself, so we are in the same boat.

So, what’s my advice?

Let bygones be bygones. Forget everything. Start afresh.

Nobody has any clue what is going to happen, short term or long term. After the dust (sorry, virus) settles, people who will get it right will simply be the ones whom luck chose to side with. They may appear on television and remind you how their prediction went right, without revealing which one, and how their skill shone through the crisis. But, believe me, those would just be the lucky ones.

Even you don’t have any clue of where all this is heading. All you can see now and act upon now is what has happened in the recent past and how you have done through it all. Your brain, like mine, is poisoned by a heady cocktail of anchoring bias, endowment bias, availability, hindsight bias, social proof, sunk cost, confirmation bias, loss aversion, etc.

How do you maintain sanity with such poison running through your mind?

Simple. Forget everything. Start afresh. But how do you go about it? Where do you start? What do you forget?

Here’s what to do.

Take a print of your current portfolio but just the names of stocks you own. Exclude your buy price and the current stock price. This is so that you forget at what price you bought a stock and whether that is up or down from that level till today.

This is another reminder that your cost price must not matter when you are deciding what to do with your stocks today. What matters is where the stock is today, and where the business and its intrinsic value may be 10 years down the line.

Anyways, coming back to your portfolio, take a re-look at your thesis on each stock, one by one, and objectively.

Ask this question for each stock you own: “If I did not own this stock already, and of what I know now about this business, management quality, competitive advantage, staying power, long term growth, and current valuation, would I buy it for the first time today?"

If the answer is yes, keep the stock. Period.

If the answer is no, sell the stock. Period.

Then run this question on other stocks in your watchlist, this time forgetting from where those stocks have fallen or risen from.

Ask this question for these new stocks – “Of what I know now about this business, management quality, competitive advantage, staying power, long term growth, and current valuation, would I buy this new stock for the first time today?

If the answer is yes, buy the stock. Period.

If the answer is no, skip the stock. Period.

Most biases that wreak havoc on our minds as investors are creation of what stock prices have done in recent times and whether we have earned or lost money on them or have seen others earning or losing money on them.

Performance of underlying businesses – good or bad – don’t cause us much trouble as their stock prices do.

So, if you wish to really clear your mind and get into a position of some sanity as things fall apart around you, the most potent tool in your arsenal is the idea of forgetting, better ignoring, what stock prices – of your portfolio companies and those in your watchlist – have done since the time you own them and especially in recent times.

Plus, don’t listen to anyone who would remind you how smart they are and how dumb you have been. Forget them too.

Just forget everything, also forgive yourself for any past mistakes, and start afresh.

 

Vishal Khandelwal is a writer, educator, investor, and Founder of SafalNiveshak.com. This article is for general information only and does not take into account any person’s individual financial situation.

 

RELATED ARTICLES

Should investors brace for uncomfortably high inflation?

Why we’re not buying the market yet

What should you do next?

banner

Most viewed in recent weeks

Why the $5.4 trillion wealth transfer is a generational tragedy

The intergenerational wealth transfer, largely driven by a housing boom, exacerbates economic inequality, stifles productivity, and impedes social mobility. Solutions lie in addressing the housing problem, not taxing wealth.

The 2025 Australian Federal election – implications for investors

With an election due by 17 May, we are effectively in campaign mode with the Government announcing numerous spending promises since January and the Coalition often matching them. Here's what the election means for investors.

Finding the best income-yielding assets

With fixed term deposit rates declining and bank hybrids being phased out, what are the best options for investors seeking income? This goes through the choices, and the opportunities and risks involved.

What history reveals about market corrections and crashes

The S&P 500's recent correction raises concerns about a bear market. History shows corrections are driven by high rates, unemployment, or global shocks, and that there's reason for optimism for nervous investors today. 

Howard Marks: the investing game has changed

The famed investor says the rapid switch from globalisation to trade wars is the biggest upheaval in the investing environment since World War Two. And a new world requires a different investment approach.

Welcome to Firstlinks Edition 605 with weekend update

Trump's tariffs and China's retaliatory strike have sent the Nasdaq into a bear market with the S&P 500 not far behind. What are the implications for the economy and markets, and what should investors do now? 

  • 3 April 2025

Latest Updates

Investment strategies

4 ways to take advantage of the market turmoil

Every crisis throws up opportunities. Here are ideas to capitalise on this one, including ‘overbalancing’ your portfolio in stocks, buying heavily discounted LICs, and cherry picking bombed out sectors like oil and gas.

Shares

Why the ASX needs dual-class shares

The ASX is exploring the introduction of dual class share structures for listed companies. Opposition is building to the plan but the ASX should ignore the naysayers and bring Australia into line with its global peers.

The state of women's wealth in Australia

New research shows the average Australian woman has $428,000 in net wealth, 40% less than the average man. This takes a deep dive into what the gender wealth gap looks like across different life stages.

Investing

The two most dangerous words in investing

Market extremes are where the biggest investment risks and opportunities lie. While events like this are usually only obvious in hindsight, learning to watch out for these two words can alert you to them in real time.

Shares

Investing in the backbone of the digital age

Semiconductors are used to make microchips and are essential to a vast range of technology and devices. This looks at what’s driving demand for chips, how the industry is evolving, and favoured stocks to play the theme.

Gold

Why gold’s record highs in 2025 differ from prior peaks

Gold prices hit new recent highs, driven by a stronger euro, tariff concerns, and steady ETF buying – all while the precious metal’s fundamental backdrop remains solid amid a shifting global economic landscape.

Now might be the best time to switch out of bank hybrids

In this interview, Schroders' Helen Mason discusses investing in corporate and financial credit securities, market impacts of tariffs, opportunities for cash investments, and views on tier two and hybrid bonds.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.