An Investor’s Guide: Effective Ways to Shield From Market Volatility

The stock markets have been experiencing new highs as the benchmark indices such as the NSE Nifty and BSE Sensex have been breaching all-time high marks.

Most investors are upbeat about these recent developments. However, there can be a phases of fluctuations and volatility in the market and an investor is required to shield themselves against such unexpected twists and turns in the investing journey. 

Diversify investment portfolio using mutual funds: Investing in equity and equity-based assets remains an ideal hedge against inflation. However, there is also a possibility of stock prices being volatile. Also, not all stocks move in the same direction in a specific time-frame. Through a diversified mix of stocks in an investment portfolio, an investor could  cushion the impact of volatility. Exchange-traded funds and index-based mutual funds are some of the ways to stay invested. 

Long-term is the name of the game: An investor should ideally enter the equity markets with a focus on long-term horizon, this way short-term fluctuations will fail to unnerve. 

The stock markets are unpredictable in the short-term, an investor can look forward to avoiding losses by ideally having holding periods of more than five years. 

Go for SIPs and stay invested: A SIP ensures that the  instalments are invested through the ups and downs of a market cycle. There have been instances where a sharp correction in the markets could unnerve even seasoned investors resulting in discontinuing their SIPs. However, it is important to note that it is exactly the SIP investments undertaken at the time of market corrections that lead to the advantage of lower average cost per unit.  So, the basic rule is to ensure that SIPs in well-chosen schemes are running as long as an investor has the wherewithal to invest.

An investor can deal with volatility by ensuring that they do not check the portfolio on an every day basis. There could be possibility to react with unnecessary actions which may prove to be detrimental to the portfolio.

While it may seem a bit tough, but it is essential to keep emotions in check. There is need to think rationally prior to making any sort of investment decision.