It's important to stay calm while Investing!
How to stay calm ,when markets are not?
Shuchi.P.NaharIntroduction:
The global economic slowdown created a lot of worries in the capital or equity and property market.
Business organizations around the world have been affected by volatility in the stock and property markets. In India, fluctuations in the currency market can obstruct the stability in the equity market and hence stock market volatility shoots up.
The study of volatility is therefore very important in an emerging market nation like India. Nifty volatility index is also called as India VIX which is treated as India’s volatility Index and is taken as an important indicator of market expectations of near-term volatility.
Sometimes investing can feel like flying through a thunderstorm. Lots of bumps and noise. Hard to see what’s going on. People gripping their armrests in panic.
But there’s always someone who calmly sleeps through the whole ordeal.
What’s the secret?
More importantly, how can you be that person calmly pushing forward when it comes to saving for your retirement?While volatility (or, the turbulence of market swings) and the sting of short-term losses might leave you feeling anxious, there are some ways that may help you handle the emotions that can go along with saving for your retirement.
The first question that arises is What is volatility ?
It is the regular change in the value of a particular asset which can be either in favor or against.
Its one of the major factor which people are afraid of while making investment and a common tendency states that volatility will lead to fall or have negative impact on investment the point is that such fluctuation take your investment up as well as down and the ones which never ever falls will never ever fly.
Its one of the major factor which people are afraid of while making investment and a common tendency states that volatility will lead to fall or have negative impact on investment the point is that such fluctuation take your investment up as well as down and the ones which never ever falls will never ever fly.
Three major solutions to avoid or reduce the risk of volatility are as follows:
Long Duration Investments:
This would give that extra cushion of time to your investment thereby reducing the impacts of small fluctuations.
SIP:
Investments are made in different time cycles which end up with the benefit of cost averaging.
Diversification:
The erratic moves in the equity markets, especially in the small caps are ignored when they are clubbed with other mid cap and large cap stocks to avoid.
Let the markets be volatile. But focus on stability.Market volatility can be a good thing,” says Stanley That sounds weird, right?
“When the news talks about volatility,” Poorman says, “it’s usually just when the market’s gone down. But healthy markets have some volatility. They go up and down. And volatility is part of what helps allow equity markets deliver returns over time.” But volatility is a short-term phenomenon.
Secrets to being a calm investor is focusing on a long-term plan—such as your retirement goals. Investing to avoid volatility is kind of like deciding on a flight because you think it’ll have the least turbulence. The main goal (long-term) of flying is to get somewhere far away. And when you’ve arrived at your destination, you’ve all but forgotten the bumpy ride.
The destination for your retirement saving is living the life you want in retirement—and that could be up to 30 years in the future.
Consider basing your investment choices and changes on a set of stable, long-term investment goals and your ultimate retirement date, not daily news about short-term market swings. Keeping your eye on the destination may help you ride out the bumps along the way.
Focus on what you can control with your retirement saving.
You can’t control turbulence. But you can choose to fly during the morning, when there’s typically less turbulence. It’s similar with investing.
“Since you can’t control market volatility, it’s better to spend your mental energy on factors you can control"
Such as the mix of your investments. A diversified mix of investment options may better align your account with your tolerance for risk and may help smooth out the ups and downs of the market.
“Not all investment options go up and down at the same time,” Poorman says.
For example, having some funds in fixed income investment options may help dampen the volatility from your equity investments.
Your investment mix may need shifting occasionally to keep everything in balance with your long-term goals.
Using these five strategies can help you join the calm and composed investors who stick to their buy-and-hold plans, even when the market tanks:
Journal when you buy:
Write down your investment thesis, or why you believe in the stock you purchased, and what would have to happen to alter your commitment to the company and sell the stock.
Review long-term trends:
Putting the market's history into perspective will show you that stock-market corrections are quite minor in the long run.
Devise a plan for market volatility:
If you're prepared for the inevitable market drops, you'll grow stronger as a result.
Put your head in the sand:
Limiting how often you check your portfolio is actually good for your mental, emotional, and financial well-being.
Remember your "why":
Investing can give us a rush, but remembering why we do it in the first place should calm our nerves.
The Bottom Line:
The higher level of volatility that comes with bear market can directly impact portfolios, while adding stress to investors, as they watch the value of their portfolios plummet.
This often spurs investors to rebalance their portfolio weighting between stocks and bonds, by buying more stocks, as prices fall. In this way, market volatility offers a silver lining to investors, who capitalize on the situation.
Links to some important articles and books collection:
https://www.forbes.com/sites/impactpartners/2018/11/05/time-may-be-your-most-significant-investment-risk/amp/#click=https://t.co/xA9HyvzB9Chttps://blogs.scientificamerican.com/observations/the-problem-with-failing-to-admit-we-dont-know/
https://www.strategy-business.com/article/Be-Prepared-for-Disruption-Thinking-the-New-Unthinkables
https://awealthofcommonsense.com/2019/11/trends-that-matter-in-asset-management/
https://www.forbes.com/sites/greatspeculations/2019/04/17/finding-value-hidden-by-the-market-noise/amp/#click=https://t.co/rb9Mm2f4QN
Shuchi.P.Nahar
Comments
Post a Comment