Reflections of a young analyst – Volatile: Stay Invested

Don’t flee the market in a panic, but rather embrace the turmoil as an investment opportunity–you’ll be better off in the long run.

The stock market always fascinates me. It always gives a kick to an investor with its volatility. In Volatility, most of the time what happens with me is – Buy high and sell low. As we all know stocks prices are more volatile, going up and down because of coronavirus, geopolitical tensions, weak numbers, political stability, and many more, and our brains say “run”.  In market Volatility, I was always uncertain about the future price and in fear about what happens next to my investments, and in the end most of the time I made rash decisions that are ultimately not in my best interest.

What I learned during the time and the ideas that helped me to participate again in the market even when markets almost kicked me from the room.

• Set a long term target
• Risk tolerance
• Diversifying and rebalancing
• Patience
• Stay Invested

• Set a Long – term target: – There is no right or wrong time in the market. You should start investing once you are ready for the same. It is not possible for an investor to time the markets with risk and tolerance. Most of the investor starts panicking when they see markets are starts fallings. There is a relationship between volatility and time in a long-term period. The Investment that is held for longer periods tends to exhibit lower volatility than those held for shorter periods. The longer we invested, the more likely we will be able to weather low markets volatility.
• Risk Tolerance: – Market volatility always calls risk tolerance into question, which is why it needs to be in focus all the time. An investor needs to make sure that he has the right mix of stocks in the portfolio according to future goals. With the period, I learned if we want a 15%-30% return in the portfolio, then we should also be ready for the downfall of 7%-8% percent in the portfolio. Most of the time, I prefer to choose the trade with a 1:2 risk-reward ratio.
• Diversifying and rebalancing: – Over the period, we need to do some changes in our portfolio or need a more diversified portfolio. A diversified and rebalanced portfolio with time helps an investor to minimize the market volatility and changes required because some investment grows more than others in a specific period. 
• Patience: – Patience is similar to hitting a Six in a cricket match. It’s not necessary to hit every ball hard but you need a good ball that can help you to score the maximum run in a single ball. The same applies in the market to wait for the bull run because a bear run is not long-lasting. Buy good quality stock and stay invested with patience. Don’t be panic about the short-term volatility.
• Stay Invested: – Last but not least, stay invested in the market. Start investing as soon as possible. Investors who stay invested during the bear markets have historically benefited from the recovery period and the next bull market.

So, it is always necessary that during the volatile market you don’t overact, that you do not sell out your investment at the bottom of the market. Always remember when we see prices are falling or we have a period of market volatility is often a time where we should add more to our portfolio rather than exiting from them at the bottom. The sometimes most important thing is to not do anything. Just believe the process and stay invested.

Author – Vivek Kaushik

Disclaimer – This is an informative and educative piece for creating awareness. Nothing in this note be considered as investment advice.