Strategies to Ride through Volatility

When equity markets turn volatile, they cause a lot of anxiety, tensions and even sleepless nights. In the volatile times many investors abandon a carefully made investment plan in a knee jerk reaction and pay the price for it..
In reality, there are different ways people react to the volatile conditions. While a seasoned investor, who has been in the market for a long time may take volatility in his stride; a novice will be tempted to pull out of the market. For a seasoned investor who has spent time in the stock market, he would know that volatility is normal in the stock market and investor has to bear it out.
In a volatile market, an existing investor might be tempted to think that the best course of action would be to try and anticipate the market movements and move his investments accordingly. It is a proven fact that even experts find it difficult to achieve this. Given this scenario, it is prudent (a) to invest in equity markets with a longer investment horizon and (b) to invest small amounts regularly than one-time lump-sum investment, which ensures that one is not fully exposed should the market fall soon after the investment is made.
It is also important to have a long-term investment horizon to handle volatility. Remember the longer the time horizon, the lesser is the risk. Therefore, it will not be wrong to say that the right approach to handle all kinds of markets, especially a volatile one, is to remain focused on your investment plan and objectives.
Courtesy : HDFC BANK INVESTMENT NEWS LETTER
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