It is important to accept that the market volatility is unavoidable and it is the nature of the markets to move up and down in short-term, so instead of being worried by volatility, be prepared. Hence, a well-defined investment plan tailored to your goals and financial situation can help you to be ready for the normal ups and downs of the market, and take advantage of opportunities as they arise. No one can predict the market, but you can protect yourself from risk.
Good investors invest regularly and consistently. The advantage of a systematic investment plan (SIP) is that it is already fairly safe from volatility. An SIP might be best if you are uncertain how the market is going to behave. Identify certain stocks with good fundamentals which have yielded an average return of more than 15% in last five years, have large market capitalization and decent market debt. Such stocks are normally expected to perform better in the long run.
Don’t get sentimental with stocks in your portfolio. Stop Loss Trigger Price (SLTP) could be used, so that, orders will be executed only when market trade level reaches a threshold price point defined by investor. Thus, SLTP helps you to relieve from the hassle of monitoring market on almost real-time basis and helps to minimize losses. This strategy will save you from risks associated with market volatility and could give you good returns in the long run.
Investors need to take proper expert advice to get a better understanding of the market situation. A Financial Advisor can help you to provide a complete understanding of the market situation. Additionally, a Financial Advisor can also help in periods of market volatility when you need the most support, by providing access to important decision-making research and information; Periodic review of your investment portfolio, while anticipating your changing needs and market-volatility strategy.
The best time to invest in the companies that have strong balance sheets, consistent earnings and dividend yields would probably be during volatile markets. Generally, investors like to stay away from market during volatility and prefer to wait till it shows signs of stability. However, a better strategy in volatile markets is to buy fundamentally strong stocks and hold them patiently for long term returns.
If you want to play very safe during volatile markets, best way is to diversify your portfolio by parking your investments in other instruments like fixed deposit, bonds, national savings certificates and gold. Diversifying your portfolio can help to reduce risk and volatility, if the assets have little or no correlation to each other. It is generally better to earn low interest than to expose yourself to high risks in volatile market.