Thursday, 27 August 2015

8 Golden Tips for New Investors in Volatile Markets

Posted by MyInvestmentsPub
Now a days Stock Markets in the world are very volatile and fluctuating frequently. This is the reason why new and small investors are afraid of entering into invest in Stocks or Mutual funds. There is s common perception among the new retail investors that investing in the volatile market is risky. That is main reason that most of the new investors restrain themselves from investing in the market when the stock market is volatile in nature. But the wise investors always make good investment even in the volatile market and earn good profit leveraging from the ups and down in the stock prices in the volatile market. You too can benefit from the rapid price movement in the stock market during the volatile phase. This article offering some effective tips for new investors for investing in the volatile market.



Why Markets are Volatile These Days?


The following are the top reasons for market oscillations in India. Though the new government trying hard to attract funds from foreign investors for various development works in the country, some national and international factors are influencing the market fluctuations.

  1. The first reason for volatility in the market is the deficient rainfall. Many parts of India did not receive at least 50% of rainfall which affecting the crop productions.
  2. The fear of US Fed rate hikes. BFSI sector would affect with this.
  3. The devaluation of China currency, Yuan which affect the domestic Manufacturing sector
  4. RBI keeping same interest rates as the inflation rate is still in alarming stage.
  5. Terrorist activities that are affecting the peace atmosphere in many parts of the world.

8 Golden Tips for Investing in Volatile Markets:

1. SIP Approach: 


Systematic Investment Plan or SIP approach is the best proved concept for investing in Equity markets. You invest every month on your selected Stocks or Mutual funds through SIP approach for the defined time horizon. The SIP approach would average your losses or gains due to market volatility and at the end yields the excellent returns. I have mentioned what are the Stocks and Mutual funds are best to invest through SIP approach.

2. Long Term Approach:


Historic statistics reveal that the markets are performed well in long run. The volatility in the market has inevitably made the investor lose their money despite the bull run in the market. However the investor those have systematic investment plans, have discipline and patience in monitoring their portfolio have been able to generate great returns in the long run. Hence it is prudent to have a long term approach with disciplined investment plans.

3. Look for Fundamentals:


Whether the market is volatile or not the basic of making profitable stock market investment is to find out the best stocks or Mutual funds for investment. That is all the more true when you are investing during the volatile phase of the market. Remember you are an investor not a trader. Hence you should always give the importance to the fundamentals while selecting of Stocks or Mutual funds for investing. The market decline actually gives you a chance to buy quality stocks at lower prices. Hence, fluctuations in the market are opportunities for investing. You can always select stocks or Mutual funds that are potentially good and have already gone through the correction phase and presently in a stable condition.

4. Keep your emotions control:


Many investors have been losing money in stock markets due to their inability to control emotions, particularly fear and greed. In a bull market, the lure of quick wealth is difficult to resist. Greed augments when investors hear stories of fabulous returns being made in the stock market in a short period of time. Instead of creating wealth, these investors thus burn their fingers very badly the moment the sentiment in the market reverses. In a bear market, on the other hand, investors panic and sell their shares at rock-bottom prices. Thus, fear and greed are the worst emotions to feel when investing, and it is better not to be guided by them.

5. Define Financial Goals: 


Defining all your financial goals and attaching each of them with an appropriate investment product is very important. History telling that markets yielding best returns in the long run. Hence, all your long term goals can be mapped to Equity investments through Mutual fund route.

6. Periodic Monitoring:


Investing in equity market is not like invest and forget. A periodic reviewing is very much required on all your equity investments. Always know what is happening with the companies / Mutual funds you have invested. Yes, you have done your research, but it could all change with one single development – anywhere across the globe. This is why keep monitoring your investments, your strategy as well as the exit prices.

7. Diversify your Investments:


Your risk factor can be reduced by diversifying in the correct way. Buy shares of companies belonging to various industry sectors. Also buy different types of instruments like shares, FDs, and mutual funds. Don’t put all your money in a single industry, stock or financial instrument.

8. Do not Over-Invest:


A thumb rule says, your total investments in equity should be equal to 100 - age of the investor. It means, if your age is 40 years, your total investments in equity should not be more than 60%. The remaining amount should be in debts which will give you guaranteed returns. New investors should not directly invest into stocks and should participate in diversified Mutual funds.

The Growth Story in Stock Markets:

Though the Indian Markets are fluctuating now, the future of the stock market is very promising and encouraging for the following reasons.
  1. The efforts being taken by the new Government would yield results in the coming years.
  2. 'Make in India' approach is a very much encouraging factor for Indian companies.
  3. The lower crude oil prices are  helpful to India to reduce their exports bill.
  4. Government's focus on electricity generation and Infrastructure support would generate new employment opportunities.

Conclusion:

Despite the fluctuations in the markets, it is proved that the returns yielding from stock market in the long run is always delivered attractively. So, follow SIP approach for long run with defined financial goals to benefit from the markets.

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