Should Investors Be Afraid Of Volatility?

Last year many investors were spooked by the volatility caused by Coronavirus pandemic. While investing once has to remember that they may have to bear short-term brunt just like any business that experiences cycles of high and low. There will be a time when valuations will be tossed out like paper. The key is to stick to the investment plan in order to reap rich rewards. 

Many get unnerved by volatility. Historically the bear onslaught has a very limited shelf-life. At most, most bear markets last few months. Uncertainty and investing share an eternal bond of friendship. In the long term markets always tend to be positive. Hence, every investor must think logically and not irrationally. Since 2014, markets have nearly doubled, and after such a phenomenal rise, a fall of 20%-30% should not make investor jittery. Instead of panicking and trying to fight the market, one must take a step back and let the volatility run its course. 

The portfolio is a reflection of investor's aspirations. While investing one must keep in mind the treacherous nature of the markets. Instead of selling off during the volatile period an investor must step back and reflect on his financial goals. Perhaps this is the best time to rebalance yoeur portfolio by eliminating what is not working. During volatile periods good companies are available at sizeable discounts. Such an opportunity presents itself only during highly volatile periods. 

An investor must remember that financial goals cannot be met by predicting tops and bottoms of the market. If he doesn't invest now, he will never find an opportune time to invest later. Many investors have been left out waiting for the right time to invest. Investing in mutual funds was never easy. The Systematic Investment Plan (SIP) is the best way to invest regardless of market levels. During turbulent periods the SIP allows the investor to cost average his investments and lower its cost. 

The key to success in investing is to be rational when everybody acts irrationally. Every successful investor knows that returns are not generated overnight. This is a gambler's mindset. In order to protect oneself from volatility, one should focus on building a balanced portfolio. The right mix of equity, debt, international funds can help one to tide over volatility. It is important to have a good financial advisor by your side. Not only can he suggest the most appropriate investments according to your risk appetite, but also help you to remain focused and disciplined in the investing journey.