Top Management Strategies for Investors to Prepare for Market Volatility
| 4 minutes read
No one likes to log into their investment account and see the value of their holdings (in which you invested) going down, but we can train ourselves not to panic. The downturns of the stock market should not be feared; it should be expected as part of the investment experience. Realization of long-term investment growth will include periodic downturns.
Everyone dreams about investment, but the road to success is full of twists and turns. It becomes challenging to invest in a volatile market. Therefore, in this situation, you need to follow some strategies; being an investor, it’s important to prepare for market volatility.
When the stock market is volatile, the majority of the investors get into nerve-pressing/panic mode and ask themselves if they invested in good companies? However, every investor must note down that market volatility is unavoidable. It is the true nature of the stock market to have highs and lows.
To avoid volatile situations, it is better to invest for the long term and this way you can minimize the risk of short-term market fluctuations. Of course, nothing comes with a guarantee in the share market, but you can use a few strategies to reduce your risk. Overall, you should also have a clear understanding of the market and implement strategies that we will share below.
Why Is the Stock Market Volatile?
Many readers might not know what volatility in the stock market is? Let us understand the term first; volatility is a measure of the market’s tendency to rise or fall within a short duration. There are majorly two factors behind the volatility. First, it can occur due to heavy trading and high price fluctuations.
Experts also suggest that volatility also occurs when there are economic releases, the launch of a popular IPO, news like mergers & acquisitions related to a company, any recommendation from a popular trade analyst, and many other factors.
Now let’s focus on the strategies that will help survive market volatility.
1. Don’t Stop Planning
A sudden drop in the market can change your mindset, but you should not panic and continue to stick with your planning and strategies. Here what is important for you to hold your nerve and keep your mindset that the market will go up and down, and it’s expected in the share market. If one strategy is failed start making the next business strategy planning. Market up and down comes with bits and parcel in share market growth. What’s important is you should understand your situation and your financial plan.
Connect with your financial professional to discuss your investing time frame, goals, and strategy to ensure you’re still on track.
2. Maintain/Retain Your Emergency Fund
You have to keep your mind that savings are significant; you can not rely on the entire funds in the market you’ve invested. Furthermore, the share market is volatile it can go up and down, if there is an emergency, then you might have to sell your shares which are in loss, therefore to avoid this situation, you must always have emergency funds that will be used in your lifestyle, monthly cost and medical expenses (if any).
Apart from this, emergency funds create a financial buffer that will help you to avoid selling your shares when the stock market is down. Finally, maintaining liquidity to cover unexpected expenses provides us the assurance to help us feel secure when the markets are volatile.
3. You Did Not Realize the Loss Until You Sell
Did you know that the stock market is the only thing where you get profit if you patiently wait for the right time? Taking advantage of the stock market while it’s down and buying your favorite investments at a lower price is logical, and we understand, and everyone does that. We generally think that if we buy a stock at a lower price, its value is less. When the market is down, your account value is simply lower. Wait, have patience. By having a diversified mix of investments across several asset classes and using proven professional money managers, you should be able to withstand the volatility. If we look back to the stock market history, the mantra between success and failure in the stock market is ‘Patience’ if you keep, then you can be a good investor.
4. Talk to Your Financial Professional
The way you go to a doctor is when you have some health issues. Same way, when you observe a volatile market, you should talk to your financial professional because when the market goes low, you might need to talk about your next steps, and they will advise you on what to do next.
They can give you professional advice, go over your financial plan and help you determine any steps you may need to take. Then, call them to take further advice.
5. Stay Invested
Short-term losses can trigger anxiety, but letting emotions drive your investment decisions may prove costly. One key to living with market volatility is focusing on long-term results rather than the daily bumps along the way. Staying in the course can be difficult, but it can also create opportunities.
Overall, in short, stay with your long term investment because experts believe if you invested for the long term, the volatile market does not harm you much, and thus you’re always most probably) be safe even when the market fluctuates.
Remember that experiencing ups and downs in the market is simply a specific part of the investing lifecycle you can minimize but can’t completely ignore. Taking advantage of these simple ways (mentioned above) to prepare for market volatility will help you become an empowered investor and weather the storms that inevitably come with investing.
Important Note- All investments involve risks, including possible loss of principal—the more aggressive the investment or, the greater the potential return, the more risk involved. Therefore Unboxing Startups will not be responsible in case of any loss in the market. So invest at your own risk.
Suprotik Sinha is the Content Writer with Synkrama Technologies. He writes about technologies and startups in the global enterprise space. An animal lover, Suprotik, is a postgraduate from Symbiosis Institute of Mass Communication (SIMC) Pune. He carries 6+ years of experience in Content Writing, and he also worked in mainstream broadcast media, where he worked as a Journalist with Ibn7 ( now known as News18 India) and Zee Media in Mumbai.