Investing one’s extra money in the right place can make you free from financial worries in coming days. A perfect investment plan will make your money work for you instead you work for money. One of the most profit earning investment vehicle is the stock market. Investing in the stock market can earn a profit in manifolds for the investors.
But while investing in the stock market, we must not overlook the volatility of the share market. Because of the volatility, investing in the stock market can be called a risky business too. Before we learn how to act during volatility, Let us first learn.
What is Stock Market Volatility?
In the simplest words, a market volatility can be explained when the prices of securities keep on changing in a short duration of time. One can say such situations volatile when stock prices go up on the first day, crushes on the second day and on the third day it raises again to some extent. If the prices of any particular stock stay stable for a considerable time span, the security has low volatility.
At the times of market volatility, most of the investors start panicking as their investment comes under a risk. Sometimes they may lose the margin which they have gained in their stock, while some other times the prices may go lower than the face value. In such situations, many investors take a wrong step which can bring awful outcomes.
Top 7 Things You Should Not Do When the Market is Volatile
Don’t Take Hasty Decisions
When markets become wild, being a smart investor you are to keep yourself calm. Many a time investors take decisions without much thinking which keep them away from the potential profit in the future. If you have invested with a goal, you must not exit at the first hiccup you have received.
Don’t Change Your Financial Plan
Whatever the situation may be, changing your financial plan when the market volatile is an act of foolishness. If you are running a SIP and stop paying instalments because you of market volatility, you will miss the profits of compounding benefits of your equity. Equity gives the best return only when they are run for a long time.
Don’t Buy Just Because it is Low
The stock market investment should never be done only because of the low prices of a particular stock. It is not necessary that all the stocks which are at a low price today will gain its value in future. In some worst cases, some stocks losses its value further. If you want to invest in any particular stock when prices are low, you must investigate the stock issuer’s past performance and future potentialities.
Don’t Invest Only in a Single Stock
Whenever you invest in stocks, remember the ground rule that you should not make your entire investment in one particular stock. Versatile investment plans attract less exposure to potential losses. If any of the stock faces volatility, the other investment of yours can cover the loss you may face.
Don’t Indulge in Leverage Positions
Leverage investment is when a person invests borrowed money to earn a profit. Borrowing for investment is never a decision of the wise investor. Undeniable is the fact that such investment can bring high returns but there are times when leverage investing can make you face great losses.
Don’t Do Media Based Trading
Whether it may be paper media or the digital media, many a time they mislead or misguide the investor. It is true that when we invest in the share market, we are to keep an eye on the news media, but before we act according to the media, we are the judge the situation at our end too. Being a sincere investor, you are to be aware of ‘ Breaking News’ broadcasted or published by media houses on stock markets.
Don’t Trade Looking at International Markets
When you are trading, make sure that you are not only following the international market. Sometimes you may find a high correlation between the domestic and international markets for short durations. In such situations, you should take any of your investment decisions looking only at the international market. Taking decision blindly depending on international market can make face a loss during the market volatility.
