Sponsored Content

BUSINESS NEWS - The stock market’s volatility is like to surf a stormy sea. For experienced investors and novices alike, knowing how to navigate the ups and downs of all stocks is critical to preserve your investments and possibly make profits. 

Below are a few strategic tips that will enable you to confidently deal with the “up and down” aspects of the market.

Know what causes of market volatility
Prior to discussing particular schemes, it is important to understand the reasons for market volatility. There are a lot of factors that can initiate sudden fluctuations in stock prices such as economic indicators, political events, interest rates changes, natural disasters, pandemics and others. These factors are what you should stay informed of to be able to anticipate market movements and avoid impulsive reaction.

Develop a clearly defined road map of investment
Having a well-defined investment plan is one of the most powerful ways of guiding through market volatility. This strategy should consist of your financial objectives, risk tolerance, and investment horizon. Having a goal of what you are investing for, whether it is retirement, a new car, or the children’s education, will help you to remain focused and not to react to the market changes on impulse.

Diversify your portfolio
“Don’t put all your eggs in one basket” is an old saying that is especially appropriate when it comes to investing. Diversification allows you to distribute risk among different asset classes (stocks, indices, bonds, real estate, etc.) and within asset classes (varied sectors, industries, geographical locations). Such an approach could protect your portfolio from large losses if one investment or market sector performs poorly.

Embrace dollar-cost 
Averaging Dollar-cost averaging is the practice by which one invests a constant fixed amount of money in a particular asset or portfolio regardless of the share price. Gradually this approach would minimize the influence that volatility has upon the general purchase. The advantage is that it eliminates a significant portion of the emotional decision making that is required from the investor, as it forces you to keep making regular investments even in the downturns when the shares tend to be selling at bargain prices. 

Keep a long-term perspective
The daily market fluctuation tends to sway our decision but don’t forget, investing is a marathon, not a sprint. Historical data reveals that even though there can be short term volatility, the stock market has a tendency to appreciate over time. Having long-term vision will enable you to survive periods of volatility without engaging in panic-selling that normally harms your portfolio.

Set up stop-loss orders
Stop loss order is an order given to the broker to sell a security, when the security price hits at a certain level. It aims at preventing an investor from losing too much on a security position. Consider setting stop-loss orders for all of your stock positions which would help in controlling the risk and avoiding the potential losses. But this approach should be used carefully as it can as well lock in either adverse movements or make you sell assets early during normal market corrections.

Stay liquid
It is recommended to be partially in cash or cash equivalents, especially when there is a high volatility. Liquidity assets may act as a financial cushion and enable you not to dispose of investments at an unfavorable price in case of an emergency. In addition, liquidity enables you to exploit market declines and to buy assets at lower prices.

Avoid emotional investing 
Emotion-based investing is the major hazard of stock market investing. Fear and desire can obscure the ability of people to see things straight, and so the decision is not going to be a good one. Regardless of the market condition (surge or crash), staying calm and sticking to your investment plan is crucial. Resist the herd mentality; the fact that the majority is selling or buying does not mean it is best for your individual monetary circumstance.

Regularly review your portfolio
Regular portfolio reviews allow you to see where you are professionally finance wise and make necessary alterations to your investment strategy. This may involve rebalancing to preserve your target asset allocation, or divesting poor performers. Although, but make those changes with an explicit reason and the way they help you align with your long-term investment objectives rather than as a response to market movements.

Educate yourself
Finally, the stronger the knowledge, the better prepared you are to select the right course of action. Spend an effort to realize some information concerning financial markets, investment strategies, and economic indicators. In the world of investing, knowledge is power, and sometimes, it can be your largest asset.

Conclusion
Dealing with stock market volatility may be challenging, but it is quite manageable with a carefully planned strategy and a clear mind. You can also immunize your portfolio from undue risks and even take advantage of opportunities that arise in turbulent times if you know what causes market movements, diversify your investments, and apply a disciplined approach. Always keep in mind that successful investing is not only about maximizing gains but also minimizing unnecessary risks.

‘We bring you the latest Garden Route, Hessequa, Karoo news’