Strategies to Overcome Market Volatility
Market volatility is part and parcel of an investor’s journey. It is the movement in the market that happens due to factors that are beyond their control. When it comes to Equity Investments, the only thing constant is volatility. However, it should not scare you. There are many ways to overcome market volatility, and some strategies are:
Ways to Overcome Market Volatility
Continue with SIPs
You should not pause your Systematic Investment Plan (SIP) because the market is volatile. It is important to remember that the market movement never stops, and you need to learn to work with it. When you continue with SIPs when the market is down, the purchase cost lowers, and you can buy more units. Thus, you make the most of it when the market is on the rise.
If you discontinue SIPs, you will lose the chance to purchase the units at a low cost. Never look at the bearish market as a negative indicator. Instead, look at it positively and buy more units by continuing with SIP.
Additional Read: What is SIP and why you should invest in it?
Avoid impulsive decisions
Whether the market is volatile or not, all the investment decisions must be based on your investment goals, and you need to trust the market movements. The trends in the market are not permanent. You always see fluctuations in the market, and your decisions should not be based on the same. Remain invested for longer-term and do not let the volatility make you buy or sell your stock impulsively.
You must never put all the eggs in one basket. The same applies to your investment portfolio, and it is a crucial Share Market strategy. When you concentrate your investment on a particular stock, you get hugely affected by a volatile market. Hence, always diversify the portfolio. With diversification, your losses will be lower if the market is down. Choose different sectors and stocks to invest in. But remember to not diversify the portfolio to an extreme; otherwise, you lose track of all the investments.
Choose different investment instruments
You can quickly diversify the portfolio by investing in different asset classes. It helps to invest in Equity, Bank Deposits, Gold, Debt, Bonds, and Government Schemes. You can also consider investing in Real Estate if you have enough funds. Do not hold heavy exposure to any particular asset class.
Invest for the long term
It is easy to address the issues related to stock market volatility by investing for the long term. You must have an investment period of more than five years for Equity. When the tenure is longer, the investment goes through several market cycles but provides consistent returns in the long term.
Additional Read: What is Long Term Capital Gain?
Volatility in the market is common and constant. But if you have a long-term investment horizon and a diverse portfolio, you can ride the volatility and enjoy great returns over the long term.
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