There are only two simple rules of successful investing:
- Markets reward disciplined, patient and value stock pickers in the long run.
- If you lose your track or get confused, refer to Rule No. 1
We spend a lot of time discussing the stock market volatility. They are an integral part of lunch conversations in the office or a casual telephonic conversation with a fellow investor. The irony is that we are so obsessed with the term that is the innate quality of the stock markets. So over-thinking about the stock market volatility is worth the time and energy? Time to remould our thought process!
Going by the literal meaning of volatility, it is the characteristic of changing often and unpredictably. If you talk about the volatility in the stock market, the prices change every single second. The recent spurt in the oil prices, political uncertainty, weak global cues, trade war fears, unfolding of scams and other micro indicators have turned Indian stock market into a tizzy. Many investors are jittery about their investments and are waiting for the volatility to subside. However, until now by our stories, you must have understood that timing the market is nothing but a game of loss.
We don’t know where the markets are headed towards, and we doubt if anyone can be as bold as brass when it comes to predicting the future market movements. Indian stock market is nothing less than a rollercoaster ride, with its shares of ups and downs. However, as a smart investor, we can plan and prepare our long term investment to survive even in the toughest times.
How to stay calm and rational at every stage of the stock markets rollercoaster ride?
Before fastening your seatbelt, list down your financial goals and objectives.
Tip: Every investor is different and it pays to customize your portfolio as per your risk appetite and objectives. A well-diversified and tailor-made portfolio will make your rollercoaster ride hassle-free and comfortable.
- Don’t follow the herd mentality. When you get started on your wealth creation ride, you may be easily overwhelmed by the noise and hearsays around you. Here, we may want to catch every market development.
Tip: Not every reaction demands an action. Sometimes it is worth to not do anything to enjoy the ride.
Take rational decisions. When the bulls take charge, most of the investors get swayed by the market euphoria without considering the risks and fundamental analysis of stocks.
Tip: All that glitters is not gold. Just because markets are going up, don’t invest in stocks which are not fundamentally strong.
- Don’t let the volatility distract you. This is where an investor’s patience, strength and perseverance is put to test.
Tip: It is easy to panic and sell stocks at this point of time. However, history has shown that markets reward investors who follow time-tested strategies by considering value businesses for their long term investment.
Rebalancing. Not every market correction demands portfolio rebalancing.
Tip: Conduct periodic monitoring of your stock portfolio to ensure that the growth prospects and fundamentals of the company have not changed and you are on your way towards the end goal.
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