Volatility in the stock market brings both together the profit potential and the risk of loss. Making the wrong moves could restrict you from previous gains too. And the volatile market is more dangerous if your moves are directionless. Volatility in the stock markets witnesses extreme and rapid price fluctuations. You cannot exist in the share market with non-directional or probability-based decisions. It will lead to heavy losses only. However, investors can adopt strategies to tackle volatile markets. During the volatility period, you need to reconsider your regular investment strategy.
Positive news about vaccines for the virus can drive stocks to a new record. And investors are looking to make profits and in hope that the world economy will round back to normal in 2021. But still, investors are worried about the volatile market. One should open a low brokerage trading account to maximize returns in the stock market. If you want to know how to open demat account online and which is a low brokerage account, keep on reading the article.
How to deal with volatile market?
Some of the insights of experts are enumerated below that can help investors a lot to deal with the volatile market:
Stay focused on your financial objectives
During a period of extreme volatility, such as the violent market fluctuations all around the world due to the pandemic, some investors start to bail out from the market and some get affected by the ostrich-effect to do nothing in fear but neither one can help you to achieve your long term financial goals. You need to ignore short-term fluctuations and keep investing to make progress toward your long-term goals.
2. Reconsider and stick to your plan
You can not eliminate the situation of a sudden drop in the market. You need to work with such a dramatic occurrence. There may be different implications for the same plan. You need to understand your situation and stick to your financial plan after reconsidering it because it is a temporary phase and will pass out but your plan will remain. Do not abandon your investing plan. You may seek advice from financial professionals to discuss your strategy and plan to make sure that you are still on track.
3. Diversification for Risk Management
Diversification is always mandatory whatever the market condition is. It is a staple of investing. Same in the volatile market condition, diversify investments. Hedge strategies will help you to reduce volatility effects on your investment portfolio. It’s more important than ever to maintain a long-term perspective. You can open Bajaj Financial Securities Limited demat account online to hold your different financial securities. It is a low brokerage trading account where you can save up to 99% brokerage fee for delivery trades.
4. Look for Growth Opportunities
The volatile market brings opportunities too because some stocks will be available at a reasonable price than ever. Such stocks may be one of those you are looking for a long time. So it's worth keeping in mind that volatility comes up with new growth opportunities, so research and act accordingly.
5. Time vs. timing the market
Time always works better than timing in the stock market. Do not waste your efforts to time the market. You just need to invest in quality stocks to earn higher returns in the long term. The best strategy is to use benchmarks. For example, you should look at previous cases of such volatile markets so that you can check the P/E of the index. That’s how you can get a fair idea as to when and how much you should invest in the market.
Your investment plan complements your financial objectives and your risk profile. You can reconsider it in the volatile market but do not ditch your investment plans and objectives.