Markets volatility is the sudden movement of stocks within a short period of time which results in price fluctuations.
Global impacts, economic and political factors, major company earnings, change in interest rates will have an impact on the market sentiments. Markets are very sensitive and can be impacted easily.
In a volatile market, one should not panic and take hasty decisions or follow others.
Here are some mistakes to avoid and consider in the volatile market.
Diversification is one of the best ways of hedging the risk. Not only diversifying across various asset class but should consider holdings across the mid cap and large companies as small companies tend to fluctuate more in times of volatility.
Timing the market
One should avoid timing the market as it could not lead to much gains. One should see this as an opportunity to enter the market with the long term horizon. Do not be greedy and invest in bad stocks.
Yet many investors make decisions on rumors and suggestions which may not be correct always. Many investors failed when they tried to time the market.
Staying invested is the best way to deal with volatility. It may not be easy as it sounds for who have invested large amounts, but one has to deal with it.
Do not forget, with each dip in the market your SIP will accumulate higher units.
Not sticking to Plan
Individuals should stick to the plan, any decisions based on short-term fluctuations will hamper the financial future.
One should not change their holistic plan on retirement planning as it may not serve the purpose. Overlooking your portfolio is not a good idea.
If you have a firm investment strategy, volatility will not have much impact as we are considering it as long term term investments.
Sticking to the plan does not mean that holding the investment in what so ever conditions.
One can get rid of investments which they are not happy with. Compare the performance with other peers and make changes if necessary.
Volatility is not always a bad thing, one cannot predict the market always not even the experts. One needs to stay invested irrespective of market ups and downs.
Before investing in any of the product, one should have enough knowledge on the financial instrument and risk associated with it.