In this post, we will understand what an investor should do under higher volatility.
How to handle a situation like a sudden panic fall in the markets?
Equity markets are generally volatile but on Friday(21 Sep 18) we saw extreme volatilely where Nifty50 fluctuated around 500 points and closed around 0.8% low. These are times when an investor’s patience is tested and one should use brain instead of acting on emotions.
What should an investor do?
Generally, all investors have some short-term and long-term picks in their portfolio. Therefore, an investor should not worry about long-term picks and should not act upon them unless it is very necessary.
For short-term picks, be prepared with Stop-Loss all the time. The goal is to cut losses and let the profit run. Therefore, you should be prepared to sell a stock if any of your stock goes below your SL.
Should we average or buy more when the stock is down 15% without any reason?
When stock prices decline more than 10-15% one can buy 5-10% of the total portfolio. At the same time, Investor should never allocate more than 20% in a single stock. If you are buying under such volatility then you should also be prepared to see more volatility.
Money management is very much necessary while investing.