In volatile markets, investment managers are navigators, not predictors

Financial markets are influenced by an infinite number of variables — economic information, geopolitical occurrences, central bank actions, investor sentiment, and even natural disasters. Due to the intricate relationships among all these variables, market timing is a very unreliable technique.

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You don't have to forecast each market gain or loss to be an effective investment manager. Rather, it's a matter of being ready for an array of possibilities. "Are we ready for whatever comes next?" is the new question rather than "what next?" Everything changes when you adopt this mindset—from client interactions to portfolio construction.

Discipline over reaction

Perhaps the greatest asset of an investment manager in times of turmoil is discipline. During times of panic or greed that sweep through the market, there is a risk that investors will be tempted to make reactive decisions. That is why behavioural coaching comes into play.

Rather than panicking at the first hint of trouble and leaving the plan, investors are reminded of their initial goals.

Remaining invested, adhering to the plan, and resisting knee-jerk moves can often be the difference between long-term victory and expensive errors.

Managers inject objectivity into emotional circumstances. They offer perspective and objectivity, which are frequently in short supply when market movements create anxiety. By upholding the fundamentals, they assist clients in avoiding diversification and staying concentrated on what's really important.

Rebalancing with intent

Volatility tends to move asset classes away from the portfolio's desired allocation. One of the most underappreciated yet effective tools investment managers use is rebalancing—restoring the portfolio to its desired composition.

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This is accomplished by cutting back on holdings of assets that have risen considerably and boosting exposure to those that might have performed poorly for a brief period. Rebalancing, when done routinely, helps investors sell high and buy low, without attempting to time the market.

Most importantly, it prevents the portfolio from inadvertently assuming more risk than it can absorb, just because one class of assets happened to perform better in the short run.

Communication: The anchor in storms

Uncertain times are rich soil for misinformation, anxiety, and doubt. Unambiguous, timely messaging from investment managers can counteract these forces. By providing insights, reaffirming investment philosophy, and providing clear updates, managers become a stable anchor for investors.

Proactive communication builds confidence. It reminds investors that declines in the market are only temporary and that long-term objectives are still well within reach. By closing the distance between uncertainty and comprehension, managers enable clients to remain on track without feeling alone in their choices.

Investing is a journey, not a race

Each investor's financial path is their own. It's not a race for the highest returns, nor a scramble to avoid losses. It's a steady, deliberate effort in pursuit of life objectives. Volatility in this journey is not an indicator of failure—it's part of the landscape.

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Investment managers are navigators, assisting investors remain on course despite the noise in the market. They keep moving forward, even when the path becomes rough. By using disciplined structures, responsive approaches, and consistent communication, they instil a sense of stability in an otherwise uncertain landscape.

Conclusion

The true strength of an investment manager is not in bold predictions, but in calm navigation. They add value by focusing on what they can control—asset allocation, cost efficiency, risk management, and investor behaviour.

In the face of market volatility, what investors need most is not foresight, but a firm hand on the wheel. One that stays steady, focused, and committed to the long-term destination.

Because in investing, it's not about who can guess tomorrow. It's about who can help you get to where you truly want to be—regardless of the weather.

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The author is the CEO of Prudent Investment Managers LLP

Disclaimer: The views expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.