Financial markets off late witnessed unprecedented volatility that has left many rattled. The investment landscape has become topsy-turvy. While equities have clearly been choppy, debt markets too have not been spared.
As this uncertainty is not likely to go away anytime soon, how do investors take refuge to survive such volatile times? Here are few tips that you must bear in mind.
Tips To Survive Market Volatility
1. Cut Down On Unnecessary Expenses & Maintain Extra Cash On Hand
If you have been looking to buy that latest gizmo or that trendy expensive dress, this may not be the best time to do so. Postpone purchases of luxury/ imported items & avoid taking any loans.
With the rupee weakening against the dollar & inflation spouting its ugly head, your household budget is likely to get squeezed. After paying your EMIs & living expenses, you may not have enough left. Try to maintain free cash which will help you tackle emergencies/ unforeseen expenses.
2. Chuck The “Herd Mentality”
When the markets rise, everybody goes overboard on equities; when gold is in the news, people end up hoarding the same & when debt products are aggressively advertised, we turn to debt. The biggest mistake made by retail investors in a volatile market is taking tactical calls across asset classes without understanding its implications.
They tend to panic when an asset class turns volatile & immediately jump or switch to another asset class. You must consciously pull yourself out of this “Herd Mentality”. Only then would you be able to exploit the investment opportunities that a fluctuating market presents.
3. Have A Well- Diversified Portfolio
Remember that equities only form one part of a prudent investment portfolio. Different asset classes perform better in different market conditions. By adjusting the weightage of asset classes in your portfolio, based on your risk appetite, you can get the most out of a volatile market.
4. Keep Your On-Going Investment On Track
If you have allocated money for achieving a financial goal, then you must stick to the objective without getting swayed by the market commotion. At times, people tend to stop their SIPs (Systematic Investment Plans) when markets are down. This is self defeating as it doesn’t allow you to benefit from investing at lower equity values (i.e. when you get more units) & neither will you be able to achieve your goal.
5. Review Your Financial Position
While it is not advisable to react to market movements in a knee-jerk manner, you should certainly review your financial portfolio at this point in time. You may have to realign certain goals & rebalance your portfolio to reflect changes in your priorities.
Set up an appointment with your investment consultant at the earliest to seek his guidance in this regard.