Market volatility can be unnerving. Some of the most seasoned investors with several decades of experience can suddenly start questioning their philosophy and decisions. Even the best are likley to suffer self doubt where the markets go through turmoil; specially after it follows a long period of a bull market. So how does one navigate these times?
First of all remember that since a long time in history, every fall has been followed by the next bull market. If you back at the historical data of the Nifty 50, you will observe many occassions when the markets have dropped by 15% - 20% only to recover and move to new highs. Why will it be any different this time? Remember to trust the capitalists!!!
Remember that the markets will eventually recover, often very quickly and sharply. So stay invested. The turnaround can never be predicted but it will come eventually. Staying out of the market in times of turmoil is often very risky. If you are not invested at this time and the market turns around you will not have the opportunity to be a part of the recovery. Stay invested
The other common situation is investors trying to time the market. There is that strong fear that the markets will continue to drop leading to increasing losses. There is often the temptation to exit the market, either wholly or partly, with an intention to get back into the market at the bottom. If you follow this approach, you are sure to have a very painful investment journey. Investors who exit the market and switch to cash during such volatile times mostly underperform those that stay invested. It is very diffiult to time the market. By the time the market turns around and you try to get back into the market, the best opportunity will have already gone past you. The longer you stay out of the market, the worse your performance will be.
So in times of volatility, tune out the noise. There will be many opinions and recommendations that you will come across. Shut the noise out.
