It is known to all that the stock market has off late been volatile. Although many think that market volatility poses a significant investment risk, when harnessed properly, it can provide stable returns, thus helping in wealth generation. Many seasoned investors view market volatility as a lucrative opportunity to make investments. Whereas, many investors stay wary during volatile times and often ignore the fact that such market conditions also allow them to invest in better valuations.
Investment inertia indeed occurs when the market fluctuates. In any case, holding an excessive amount of cash or delaying investment can likewise imply that your savings are not generating any returns, thus lowering the profits in the investment portfolio.
As a rule of thumb, investors must keep themselves aware of the fact that market volatility is inevitable. Here are some fundamental investment pointers that are appropriate to all.
Break And Find A Balance
Allocating funds across various asset classes of multiple risk level may not guarantee a profit all the time. However, it helps lessen wealth erosion during volatile market conditions. To make the most of it, keep a tab on the risk-return trade-off for the three fundamental financial market vehicles – equity, debt, and money market. During market volatility, balancing high-risk investments with medium and low-risk investments is considered a safe investment strategy to tackle choppy market conditions.
Explore New Asset Classes
During volatile market conditions, investors should diversify funds across various asset classes to reap the maximum benefit, thus safeguarding their investment portfolio. A sensible approach to navigate through volatile market is by exploring new asset classes. Alternative investment options like invoice discounting has emerged as a great tool to help diversify a portfolio and gain higher returns at low risk in a short period.
Pace Up With The Market
Many seasoned investors believe that timing plays a crucial role in wealth generation. A great investment strategy is to invest when the market is undergoing a bearish mode, and sell when it is in a bullish state. To tackle volatile market conditions, keeping aside a fixed monthly amount for equity investment is considered essential. A SIP implies that an investor will end up having fewer units for the given high prices in a bull market.
Living with a volatile market is simpler when you have a firm investment strategy in place. In case you have well-managed funds as per your goals, it is simpler to remain on track. Try not to change your asset allocation based on the current market condition. Having said that, asset allocation must be determined by the goal. Hence, having a sound investment strategy will help in riding through choppy market conditions.