A volatile market can be hell for investors, and it becomes difficult to predict the flow of the market while suffering losses. However, does that mean that we give up on the market? Of course not; as experienced traders, we have got used to riding the waves. But will that be the same for inexperienced and upcoming traders as they get to experience such volatility and watch the market go against them? From experience, how should an investor react in a volatile market, and how are they expected to recover?
Hello and welcome to another topic on investment and how to get the best out of your portfolios. This blog ensures that you are educated with the latest information and solutions for your investment problems. As the market is complicated, I try to bring the technicalities down to the minimum for everyone to get the flow of the market.
I have always maintained taking a long position when trading stocks, which is having a long term plan. But we are humans, and I understand what it takes to hold on to positions through these volatile periods. People would like to hear from experience the best ways to act and behave during such a market volatility period. So now let’s take a look at best ways to act and invest in volatile markets:
Don’t invest the money you need in the next three years
It would be a mistake to invest money you may need in the near future, like paying the mortgage, house rent, school fees or business funds. You will only put yourself in greater anxiety when the market begins to move in such a volatile manner to salvage what you can of your investment. And it will be unfortunate for you when the market goes as planned in the long run. So keep the fund you will need in the nearest future in liquid investment or in savings accounts where you can easily access them. But for your stock investment, I will advise you to invest money you don’t need in the nearest future so you can easily ride the volatility in the market.
Now is the best time to invest
You may have heard of the trading term, buy low and sell high, or buy the dip. Yes, this is a good investment strategy when you have a good stock or investment portfolio that you are confident will rise. Some stocks portfolios like Nasdaq will provide you with a trading opportunity to enter during a volatile period like the one we are experiencing. Thus volatile business is not as bad for investment, for it provides us with the opportunity to enter some high-value markets such as the S&P 500. If you have spare funds that you have no immediate use for, I will advise you to buy such high-value stocks during the volatile period when the stock is low.
Evaluate your strategies
At times, the bear market offers me the opportunity to re-evaluate my market strategies and risk management. I have always believed we learn from the market, as history is our favourite teacher. And what better way to learn from history than our present situation to do better in the future. So it would be best to take time to analyse the current risks and how the events affect your funds, trading plans and strategies. It will provide you with the opportunity to make reasonable changes that will make you do better in the future. At this time, I also engage other traders to see how they are handling the present situation and possible strategies they have set up.
Staying off the market
Now, if you are the kind of person that gets easily anxious and might make a rash decision, I will advise you to stay off the market in a volatile period. And this is one reason I prefer long term strategy over short term strategies because, with an excellent long term strategy, your investment will indeed override the volatile period. All you have to do is let your strategy take care of the volatility while taking a break off to avoid anxiousness that may lead to a wrong decision. With short term strategies, you will not have the luxury of managing the market by staying off.
Diversify your investment portfolio
Another way you can ride through a volatile market is to diversify your investment. I always recommend that you do not put your eggs in one basket. Always spread your investment across different industries for most possibly, when one sector is doing poorly, one will be doing better. Diversifying may also reduce the cause for anxiety that will affect your decision making.
Don’t revenge trade
One mistake most investors make is to try and make a profit out of the volatile market by day trading; let me tell you that it is a bad idea, and you may lose more money. Day trading for quick profit is not for me, and I will not advise anyone to do that, especially in a volatile market. Instead, be patient and don’t try to make a fast one out of the market, thinking you may recoup some of your loss.
In all the tips mentioned above, I would encourage you to try and hold your position and stay with your plan. However, you may also prepare a defence mechanism for volatile periods like placing some of your funds on the safe market, such as utility and service companies. Even though the volatility will affect these markets, they can recover quickly and put you in a favourable position.
Now that we have concluded today’s topic, I would like to hear from you. If you have an opinion experience or would like to ask some questions, you should drop them in the comment section. Also, share across friends and family as some people will find this helpful information and apply some of the tips mentioned. Furthermore, you should follow us across our social media platforms to keep up with the latest updates, suggestions or topics.
You can also check out my previous blogs such as ” What to Expect from the Stock Market in 2022 “.
Recommended books for further reading:
- Intelligent Investor: The Definitive Book on Value Investing – A Book of Practical Counsel
- Stock Market Investing For Beginners: The Investment Guide – How to benefit from the crisis, invest in stocks and generate long-term passive income incl. ETF and Stock Picking Checklist
- How to Make Money in Stocks: A Winning System In Good Times And Bad
- Investing QuickStart Guide: The Simplified Beginner’s Guide to Successfully Navigating the Stock Market, Growing Your Wealth & Creating a Secure Financial Future
- Investing Demystified: How to create the best investment portfolio whatever your risk level
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