5 Things to Do in A Volatile Market
Market volatility is not a new concept when investing in the stock market. Volatility technically means the standard deviation of the stock market returns using the mean. In simpler terms, the change in the prices of stocks during a particular period is known as volatility, which you will definitely face when you enter the market.
Moreover, volatility affects investors when the stock market shows a downtrend for a more extended period. Nowadays, such a downtrend can be seen due to the Russia-Ukraine war, crude oil price hike, UK political uncertainty, and skyrocketing inflation rate worldwide.
In such a downtrend with high volatility in the market, here are the five things you can do to secure your money:
Stick to your long-term financial plan
Due to temporary downtrends and volatility in the market, changing your financial plan and making quick investment decisions could worsen your financial situation. Please stick to your financial plan until you do not achieve it. When you focus on your long-term investment plan, you can overcome all the adverse aspects of the economy, and further market recovery will help you create wealth.
A well-diversified portfolio
Suppose you have invested in a well-diversified portfolio according to your financial risk appetite. In that case, you do not have to worry about prevailing conditions in the market, as it has always been seen that all the assets do not move in the same direction at the same rate. For example, suppose your asset mix has a portion of gold. In that case, it might have given you a positive return, as investors shift their focus toward physical assets when stocks become highly volatile.
Possible opportunity for discounted share prices
Suppose you have a few stocks in your watchlist that are fundamentally strong enough to sustain and give handsome returns to achieve your financial objectives. You might buy those stocks at a very lower price than before. Also, an economic downturn might be an opportunity for you to buy your favorite shares if they are trading at discounted prices.
Utilize the power of SIPs
During market corrections or downturns, by investing in mutual funds through SIPs, you can leverage the benefits of rupee cost averaging. When you invest a particular amount of SIP during an uptrend market, units get expensive, and you get fewer units of the fund. On the other hand, during the downturn, the share prices of the stocks fall, and now you can get more shares of the same fund. This is how rupee cost averaging might help you keep on going during volatile times.
Doing nothing is also a better option
Yes, if you are new to your investment journey and confused about how to reach the prevailing condition, you can just sit back, relax and keep your investment as it is. It could be a riskier option as you might have invested in new companies which require an exit from the market. But doing nothing is less risky than selling in panic. Sometimes, you might panic sell good investments which are worth holding and stay invested in a scheme that is unworthy to stay. So it's better to do nothing and follow a less risky path during those times.
Patience is the key to being successful in your investment journey. When you have a proper financial objective for an investment, you tend to lose less as you can keep yourself calm. The second and most important quality for an investor is consistency. If you are consistent enough in your investment, you will be able to create wealth with the help of the magic of compounding.
By implementing the points mentioned above in times of downturn and volatility, you can keep your hard-earned invested money safe which also helps you optimize your financial plan.
This blog is purely for educational purposes and not to be treated as personal advice. Mutual funds are subject to market risks, read all scheme-related documents carefully.
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