Volatility triggers the alarm to get a portfolio checkup. Make sure to re-evaluate your asset allocation based on your long-term goals.
In the previous quarter, from October 2018 to December 2018, markets were particularly volatile. Such conditions shocked several traders and there was a phase of severe contemplation. The volatility in the market does make losses, but also generates heavy market returns. Let us understand how market volatility can be beneficial and how investors can take advantage of this situation.
Maintain a perspective in case you start to re-contemplate your decisions
Stay calm against the over-reaction of the market. Avoid making any changes in your current stock holdings, until the volatility passes. Remember – the more you rush, the deeper you fall. Refrain yourself from timing the market, it will save you from making any losses.
Opportunity to buy
Instead of panicking due to the volatile structure of the market, put it to a good use. Market volatility is an opportunity to buy stocks. Making purchases at a lower price will benefit you in the near future. Compose yourself, evaluate the correct picks and make wise choices.
Know the value of what you own
If you are a naive investor, you are bound to fall prey for buying and selling stocks at the wrong time. If you don’t know the value of what you own, you will end up letting the market and the flashy news to make decisions for you. Study and analyze each of your investments and know its real value - whether it is worth holding on to or not. This will help you to make decisions by yourself rather than getting influenced by the herd mentality.
Get a portfolio checkup
Volatility triggers the alarm to get a portfolio checkup. Make sure to re-evaluate your asset allocation based on your long-term goals. Reduce the number of any investment which is leaking and resulting into making losses. If you are deciding on selling a particular stock, don’t rush into it right away; give it a thought for few days, there is always a chance that the markets might bounce back.
Don’t make hurried decisions. Stay calm and let the rough phase of the markets pass by. Take up the volatility as an opportunity and not as a threat.
(The author is EVP at Edelweiss Wealth Management)Disclaimer: The views and investment tips expressed by investment expert on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.