Here’s How to Overcome Market Volatility: Market volatility is simply market movement caused by various factors that are outside our control. Equity-linked investments can be subject to market volatility. Market volatility should not be fearful. There are several strategies to overcome it. The following strategies have been covered in this article.
Here’s How to Overcome Market Volatility
1) Do not pause, or stop your SIPs
You shouldn’t stop your systematic investment program (SIP) because the market has entered a bearish slant. It is important to recognize that equity-linked investments are subject to market movements and should be accepted. When the markets are down you can keep your SIP going and buy more fund units.
It is a great way to get the benefits of the market gaining. Stopping your SIP will mean you miss out on the chance to purchase fund units at a cheaper price, which can lead to loss of long-term gains. You should not view bearish markets as a negative thing. Instead, keep your SIP going and pick up more unit fund units. It may be worth increasing your ticket size for your SIP.
2) Never make impulsive decisions
It is always a bad idea to make uninformed decisions. Your investment objectives will be the basis of your investment decisions. You must trust the market, the fundamentals of the companies that you have invested in, and not allow for any knee-jerk reactions. Market trends, whether bullish or bearish, are not permanent and will fluctuate.
Your investments should be trusted and you must stay invested for the long term. If your investment goals are not being met, you might consider selling your holdings. A financial advisor can help you draw out your investments to meet your goals at the risks that you are willing.
3) Diversify your portfolio
When markets are volatile, you don’t want to focus your investments on a specific stock or sector. You can be sure that you will lose a lot if your investments are concentrated.
You can avoid that by diversifying your investments among different stocks and sectors. It is important to not diversify too much, as it can be tedious to track all of your investments.
4) Invest across all asset classes
Diversifying your portfolio through different asset classes is the best method to diversify. Diversifying your portfolio requires you to invest in equities as well as debt, government savings, bank deposits, and gold. Although you may consider real estate, liquidity is not an option as it takes time to sell your real property holdings. The rule of 100 minus your age can be used to calculate your equity exposure. Your equity exposure can be as high at (100-40%)% or 60% if you are 40 years of age.
5) Have a long-term investment horizon
You can reduce the risk of market volatility by having a long-term plan. For equity-linked securities it is recommended to have a longer time frame than five years.
If you have a longer tenure for your investments, it allows you to let them go through market cycles. This will help you provide stable returns.
Conclusion
Equity-linked investments are able to withstand market volatility. A longer investment horizon, diversifying across asset classes and markets will allow you to ride market volatility and make good long-term returns.