How Do Investors Deal With
market is highly unpredictable. Some days can be good while some bad. No one
can really predict with surety which way the markets will swing in the short
run. Often the tools for stock market analysis also fail. The reason for its
unpredictability is the volatility associated with the markets. During volatile
markets, investors are often left confused regarding their investment strategy.
The best way to deal with volatility is to maintain a long term strategy and
avoid the short term fluctuations. In this article,
we shall learn more about the volatility in the stock markets and how to deal
going ahead let us understand the term volatility.
Meaning of Volatility
means a sharp rise or fall in the prices of securities or overall market
performance within a short span of time. Here the stock market behaves
irrationally by showing big swings in the negative or positive directions. Generally,
upward volatility (i.e. when price moves up) is considered good by the
investors, while on the flip side, downward volatility (i.e. when price moves
down) creates panic and concern amongst the investors leading to radical
market volatility can get difficult for intraday
traders. In such situations, stop loss plays an important role. Click here to
know more about “Importance of setting stop
to Deal with Volatile Markets?
at Indira Trade, share with you some tips to deal with volatile markets.
Invested and Stop Tracking: During volatile market,the best strategy is to remain
invested in the stocks without looking at the daily price fluctuations. By
staying invested for the long term, you
not only avoid volatility but also enhance the chance of making more returns
from your investment. Staying invested can fetch you returns that you were
looking for. This is only possible if you are a long term investor and don’t get
affected by the volatility in the market.
Change Your Plans: When
you enter the stock market you have some goals and plans to achieve higher
returns. When markets go into correction and ultimately into volatility, stay
firm on your old plans. Do not take a bad
decision in panic which can prove to be
regretting in future. Just reassess your strategy or change the course whenever
needed. Changing the whole strategy will lead to bad decision making and loss
to your portfolio.
the portfolio is always considered as the best strategy. A proper mix of stocks
from different sectors helps in reducing the risk. Like, a portfolio having
stocks from steel sector, pharma sector, media sector, etc. will diversify your
risk. If there is a fall in one sector, you will have some other sector in your
portfolio that is fetching you profits. So use technical tools for stock
analysis and only then make a diversified portfolio.
Management: In volatile markets, investors should have efficient
risk management strategies.
Being active in such times can help you make more money or protect you from
future losses. Volatility often brings down the prices of good stocks and this
is the time when you can take the opportunity to add more stocks to your
portfolio. If you have high beta stocks in your portfolio, you can manage the
risk by swapping them with defensive and safe stocks at the time of volatility.
from a knowledgeable person or firm can help you deal with volatility in a much
better way. The advisor can be a person with good experience in the stock
market or a brokerage firm. When you feel that things are not going in your
way, professional and experienced people’s advice is very handy. It will not
only save you from incurring losses but help to carve out strategies for your
portfolio in the long run when volatility strikes again.
Cash in Hand: It
is not always prudent to keep all your money invested in the stock market. Keep
some money in hand so that you can grab the opportunity. When volatility hits
the market, the stock prices fall down drastically and this is the time when
cash in hand comes handy. Purchasing the shares during such times when prices
are at rock bottom can help you make higher profits in the long run. So always
have some cash in hand that can be used
when the market crashes.
market volatility is a part and parcel of the stock market. When you enter into
stock market, come with acceptance of the fact that every day would not be a
good day for your portfolio and when the volatility strikes, it can get worse.
However, by reading the above points you can handle the situation in a much
better way. By following the above tips you can certainly protect your
portfolio from losses and grab the opportunity from falling markets.
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