“The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell.” – Sir John Templeton.

In his book “The Laws Of Wealth – Psychology and the Secret to Investing Success“, New York Times best- selling author Dr. Daniel Crosby defines a “correction” as a 10% drop in stock prices, whereas a “bear market” is defined as a 20% drop. He also gives us this important fact, “From 1900 to 2013, the US Stock market experienced 123 corrections.” In case you didn’t notice, that is more than once per year. While bear markets are rarer, we still had to suffer through one about every 3.5 years (on average) during that time frame.

Warren Buffett, one of the richest man in the world, has consistently capitalized on bear markets by investing more during those declines while others have been fearful. But it is easy to talk about being greedy when others are fearful, but it is quite another to do it, particularly for ordinary investors. It is actually very scary to invest when the stock markets are at their scariest best. If you wait until there is a consensus that the crisis is over, you may miss some of the most significant opportunities to buy low and speed up your march towards wealth creation.

We are now experiencing one of the biggest crisis of the century. Fear of the unknown seems to be gripping all aspects of our life. Firstly, there is no denying that the COVID-19 pandemic will have an impact on economic growth and corporate earnings in the next few quarters to come. This volatility is likely to continue until the pandemic reaches manageable levels.

At this time, many of us would be worrying about our bleeding investment portfolio and that is totally understandable. But don’t let panic influence your investment strategy. Because, time and again, we have noticed that the markets in India and the world regain confidence and will bounce back.

A virus threat of this scale may be unknown. The world is united to fight the pandemic. It is only a matter of time before we regain our normal lives. In such a scenario, the economic damage will be temporary and transitory in nature. Here, it is important to note that the fair value of a fundamentally strong quality stock does not change because of transitory stress in its earnings for a few quarters.

This is not the time to pull out your investments as Thomas Fuller famously said that “the darkest hour is just before the dawn”. In fact, this is the time that smart money buys equity, if one has extra cash. However, if your risk appetite does not permit you to enter equity market at this juncture, please consider investment in Fixed Income Funds which is a good option in falling interest rate scenario.

Please remember this apt quote from Dr. Crosby. “Although the media talks about 10% to 20% market losses as though they are the end of the world, they arrive as regularly as spring flowers and have not negated the tendency of markets to dramatically compound wealth over long periods of time.” With that in mind, you shouldn’t fear corrections and bear markets. Instead, embrace them.