How Do Investors Deal With Volatile Markets?
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Market Psychology | November 18

How Do Investors Deal With Volatile Markets?

Share 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 with it.

Before going ahead let us understand the term volatility.

Meaning of Volatility

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 decision making.

Overcoming 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 loss”.

How to Deal with Volatile Markets?

We at Indira Trade, share with you some tips to deal with volatile markets.

·     Staying 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.


·     Don’t 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.


·      Diversify: Diversifying 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.


·      Risk 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.


·        Take Advice: Advice 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.


·       Have 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.

Stock 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.

Indira Securities is a leading stock broking firm. We provide diversified services to our clients ranging from trading in stocks, commodities, currency and derivatives. We give our clients share investment advice using technical analysis tools. We are known for providing stock market strategies that work and reap benefits to our clients. Open a Demat account with us and enjoy our hassle free services. We also provide trading and investment facilities through the use of our mobile application. For any information or query, you can contact us on our phones numbers or drop us an email.



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