What should investors do in the face of a stock market crash?

To begin, understand that there is no crash.
For those who were fans of the wonderful Asterix comics, you know that the ancient Gauls were very courageous people who did not know the meaning of fear. However, there was one thing they were afraid of, and that was the sky falling on their heads. Of course, the sky never really fell. But that didn’t stop the Gauls from thinking he might fall.
Four months ago, in these pages, I began my column with the following sentences: Why does the market not go down? When will it fall? This is the central question that many people compulsively ask themselves.
Of course, many of them are asking the questions in more sophisticated language – about valuations, the pace of recovery or technical gibberish.
Basically, there is a widespread belief that there is a hidden variable, a trick for rising markets or it is an illusion. As in the story of Cinderella, the clock will strike midnight and then everything will disappear.
Well, here we are. I guess all those people must have breathed a sigh of relief by now. The event they were looking forward to has happened. The market fell. Happy now?
Of course, as things stand, that’s hardly a downfall. As I write this, the sensex and the Nifty are at a one-month low and are actually above a level they first hit in late August, which means the level current would have been an all-time high just five months ago. They are also more than 2 times their initial viral crash and around 38% higher than the previous all-time high reached before the Chinese virus arrived, which was in January 2020.

Overall, except from the perspective of short-term bettors, large-cap indices are hovering around their all-time highs.
This is the point to understand. Nothing really happened. There is no breakdown. The sky didn’t fall, not even close.
The problem is that there is an awful lot of noise and lamentation in social media as well as mainstream media about a stock market crash. why is this the case?
Part of the problem is that there is always noise these days. We live in a time where TV channels have to pretend there is breaking news 24/7 and on social media things are even more glaring. If someone says that the markets are doing well, he will be strongly denounced by others who will claim to have been ruined, and vice versa. It’s normal now, the way things are in public interactions.
There is also an additional problem. Since about mid-2020, a huge wave of new investors has come to the markets. This is clearly seen in the demat account numbers and has also been noted by everyone from regulator to market intermediaries. This generation of investors is now experiencing its first period of volatile markets.
The cycle of bull and bear markets that you may be familiar with, but it overlaps with another cycle of new investors coming in, experimenting with everything and learning something.
It is a learning experience that everyone should have. You may know from theory and through history that markets crash, but unless you’ve been through a full market cycle, your education is incomplete.
Over the long term, successful people in investing have certain things in common. They start and continue to invest gradually. More importantly, they take care to choose stocks with some attention to quality. This meant that even if the value of their investments fell during a crash, they would eventually recover and gain again. There was no permanent damage.
Of course, this largely depends on the psychology of the individual. Don’t sell and run and come back when the markets start to rise. Instead, switch to quality stocks and hang around, increase your investments. It’s a cliché that failure is the best teacher, but it’s become a cliché because it’s true. Just try and learn from it.
(The author is the founder and CEO of Value Research)