Equity investing might sound intriguing to new investors. Often, what interests them is not the market itself but the short-term volatility associated with it. Such moves can catch investors off-guard and lead to emotional decision-making. However, with the right approach, these fluctuations can be navigated successfully.
Here are four vital tips for investing during market volatility:
Stay Put with your Goals
Staying invested in your long-term goals is most important when it comes to investing during volatility. You might be thinking about pausing your SIPs (Systematic Investment Plan) when the market moves in either extreme direction. However, it could be beneficial to continue your investment in SIPs or an opportunity to start a SIP during a downturn, as it allows you to accumulate more units at lower prices, which could be beneficial in the long run.
This is where a disciplined investment approach, like SIPs, helps navigate different market conditions - something also emphasized in the ‘Sahi Investment Plan’. SIPs work on the principle of rupee-cost averaging, meaning you buy more units when prices are low and fewer when prices are high, potentially lowering your average cost per unit over time. Additionally, staying invested ensures you benefit from compounding, which could enhance your returns in the long run.
Instead of reacting to market swings, investors - whether new or seasoned - can leverage SIPs to continue investing systematically and even start fresh SIPs when markets dip. This disciplined approach helps navigate volatility with confidence while building a larger investment corpus through unit accumulation.
Avoid Investment Biases
Short - term volatility could look intriguing. But during such scenarios, you need to avoid investment biases, such as herd mentality (for instance, falling prey to popular beliefs for making investment decisions), confirmation bias (this includes interpreting equity price moves as confirmation to one's beliefs), loss aversion (such as making investment decisions solely to avoid losses than making gains) and more.
Falling prey to any of these investment biases could push you towards investment decisions that may be detrimental to your portfolio. Therefore, you must examine and re-examine your investment decisions during volatility.
Seek Financial Advice
One of the effective ways to avoid investment biases is seeking professional financial advice. A qualified financial advisor or mutual fund distributor could guide you in making informed decisions, ensuring you don’t react emotionally to market fluctuations.
Diversify the Right Way
Diversifying your portfolio by adding debt-based investments may add stability. A well-balanced asset allocation strategy helps manage risk and keeps your investments resilient. Volatile markets can tempt you to deviate from your plan, but a well-diversified portfolio can help you stay on course.
What Should Seasoned Investors Do?
For experienced investors, market volatility can present strategic opportunities. Rather than exiting or holding back, seasoned investors may explore:
- Tactical asset allocation – Adjusting exposure to different asset classes based on market conditions.
- Contrarian investing – Identifying undervalued assets during market dips.
- Rebalancing portfolios – Ensuring asset allocation remains aligned with financial objectives.
By applying these strategies, experienced investors can use volatility to their advantage rather than fearing it.
Final Thought:
Market fluctuations are inevitable, but with the right mindset and strategy, you could turn volatility into an opportunity. Stay committed to your goals, avoid emotional investing, seek expert advice, and diversify wisely.
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