Monday, June 16

Investing in High Volatile Markets

Investing in High Volatile Markets
The domestic stock markets have seen panic selling of late.

In fact, this panic selling was seen throughout the world on the account of a slowdown in the US economy. Most global indices closed deep in the red. Actually, we are witnessing a huge amount of volatility in our markets from the last couple of weeks.
There are many voices in the market that the bull party here is over. But, if you take a closer look, you will not find any major reasons to sell stocks in the market. In fact, long-term investors should use this market correction as an opportunity to accumulate blue chip stocks.
There is absolutely no major change in the fundamental story of the economy. Yes, in spite of the Inflation shooting up, Growth rate projected downwards et al.
As per economists' forecasts, the economy is all set to grow at around eight percent this year as well. This could be slightly lower than last year's growth, but otherwise, India would continue to be the second fastest growing economy in the world after China.
Here are some strategies for investors during a correction phase in the markets:
For risk-averse investors
It is advisable to take a medium to long term horizon while making investment decisions. Market rallies and corrections are usual phenomena.
It is advisable for riskaverse investors to do their homework (investigation of stocks) and start investing in the market in correction phases.
Since nobody can predict the bottom of the markets, it's advisable to buy stocks in small bundles. It's important to keep in mind the transaction costs while working on the size of these bundles. For Investors with risk appetite
Investors with a higher risk taking capacity can divide their portfolio between medium, long-term and short-term investments (a fraction of the portfolio based on risk profile).
This small portion of money can be invested in short-term opportunities based on market moods. These short-term opportunities sometimes give very handsome returns, but investors should keep in mind that investments in the stock markets come with a certain degree of risk. Short-term investments require monitoring at regular intervals. Also, the stock selection and time of investment becomes crucial when we talk about the percentage gains.
Some strategies for investors to make money in these market conditions:
Go long-term: Investors should invest with a long-term outlook in fundamentally good stocks only. Patience is the key in volatile market conditions. It is possible that the scrip you buy may fall further, but you should not panic in the market.
Invest safe: Investors with low risk appetite should only invest in blue chip (front runner) companies. Investors with high risk appetite should invest in large-cap as well as quality mid-cap companies with good trading volumes and information availability. Never invest in stocks where there were no fundamental reasons for them to surge.
Set targets: In volatile market conditions, smart investors do not panic. They buy when everyone else is selling and sell when everyone else is buying.
Always invest in stock markets with proper objectives, profit booking and stop-loss targets.
Maintain liquidity: Another important thing to keep in mind is that investors should invest their own risk money in the stock markets.
This means that investors should have enough liquidity in hand after investing in the stock markets. Investors should not borrow (take loan) to invest in the stock markets in these conditions.

For some may thnk these tips to be old and outdated, please remember, it may be old, but not outdated. Stock to the basics and a down market sould never be the reason for u to not earn money.

1 comment:

  1. I would also say that you should make a long term investment plan. The long-term investment portfolios work best when then contain strong stocks from a diverse array of industries.