How can I protect my investments during a market crash in India?

You can protect your investments during a market crash in India by diversifying your portfolio, investing in defensive stocks, using stop-loss orders, and maintaining sufficient cash reserves. These strategies help minimize losses and provide financial stability in volatile times.

1. Diversify Your Portfolio

Spreading your investments across different asset classes reduces risk and minimizes the impact of a market crash.

• Invest in a mix of stocks, bonds, and gold.
• Diversify across different sectors to balance risk.
• Consider global investments to reduce market dependency.

2. Invest in Defensive Stocks

Defensive stocks, such as those in healthcare and utilities, tend to perform well even during market downturns.

• Choose companies with strong fundamentals and stable revenue.
• Focus on sectors like FMCG, healthcare, and utilities.
• Check for stocks with consistent dividend payouts.

3. Use Stop-Loss Orders

A stop-loss order automatically sells your stock when it reaches a certain price, preventing excessive losses.

• Set stop-loss levels based on your risk tolerance.
• Use trailing stop-loss orders to lock in profits.
• Review and adjust stop-loss orders based on market conditions.

4. Maintain Cash Reserves

Holding cash during a market crash allows you to buy undervalued stocks and manage emergencies effectively.

• Keep at least 10-20% of your portfolio in cash.
• Avoid being fully invested in uncertain markets.
• Use cash reserves to take advantage of market dips.

5. Hedge with Gold and Bonds

Gold and bonds provide stability and act as a hedge against stock market downturns.

• Invest in gold ETFs or physical gold for protection.
• Consider government bonds for steady returns.
• Use asset allocation strategies to balance risks.