In the volatile market, many investors get frightened and take the decision to sell stocks at the wrong time intended to avoid the risk of further loss. But in reality, a volatile market brings new growth opportunities as some stocks can be available at more reasonable prices. Credit your demat account even in the volatile market that will bring benefits in the long run.
Volatility is not solely about economic factors but also about investor reactions because investors are affected by psychological forces. Investing in the stock market requires psychological independence as volatility is the result of the collective change of mind.
Some of the key points are enumerated below that an investor should follow during a volatile market. But before that discussion, let us understand what is a demat account. Demat account holds several financial securities in electronic form with safety and security. No one can access your investments without your permission. It is mandatory to open a demat account to invest in the stock market. You can open an online demat account easily with a stockbroker.
Key Points
1. Trust Your Investing Strategy
You should hold tight on your position because if you are looking for any benefit in selling your securities during the bear market, you will be disappointed. In fact, it could cost you in the long run. Instead, hold your significant shares. It will bring a higher possibility that you will get benefits with a market upturn.
2. Stay Away from Ostrich Effect
During volatility, investors either over-react and take the exit from the market altogether, or they avoid negative financial information and do not want to do anything. But both behaviors are incorrect to achieve your long-term goals. But yes, you can sell a part of investments from your Demat account and reinvest in some investments that have become more reasonably priced due to volatility.
3. Grounds of Volatility
An economic release, good or bad news about companies, even a recommendation by a renowned analyst, unexpected earnings results, IPO news can result in an imbalance of trade orders i.e., all buys and no-sells or vice versa. Sometimes institutional investors may cause market volatility, so verify the news before making a selling decision. The market price is the reflection of all information in the economy. Learn to keep your behavioural approach right during every situation.
4. Invest in strong companies for regular dividend
Investors should choose high dividend-paying stocks because even after the stock price falls, you will earn a steady income in the form of dividends and the stock price will be stabilised in the long run. Therefore, it is always advised to analyse the financial statements of companies. This fundamental analysis predicts the long-term performance of a company. Invest in quality stocks of a company that have lower P/E ratio than their industry average and lower price to book ratio.
5. Diversification Rule
The foremost rule to follow is to have a well-diversified portfolio that cannot let you down even in the downturn of the market. Make sure you have a broad mix of investments across industries. This will definitely help you to tackle the volatile market. Consider both levels of diversification.
The Bottom Line
As an investor, you must be aware and learn how to minimize the risk involved in the stock market instead of panicking and most importantly do not make hasty decisions because of fear of the unsteady market. Search for opportunities and reconsider your investment portfolio. Markets will fluctuate up and down but its short-term fluctuation. Accept it. Hasty decisions may cost you in the long run. I hope you enjoyed the article got the all points about the investment in volatile market.
