Tips To Sail Through Stock Market Volatility

  • Apr 13, 2020 NZST
  • Team Kalkine
Tips To Sail Through Stock Market Volatility

A few months back, the economic figures such as Gross Domestic Products, National trade surplus and Consumer Price Index were highly revered for evaluating the progress of the country. However, not anymore, as the anchor to success suddenly shifted to economies’ resilience towards the survival against the deadly pandemic.

The world every day wakes up to check the relative pace of COVID-19 and gauge the intensity of the blow it has inflicted on the nations. And the fluctuating economic figures - they merely remain as the shadow trailing behind the impact of coronavirus.

Amidst medical emergency when the world grapples with the hardships, a hard-core scepticism among the people is inevitable. The number of cases has skyrocketed considerably in the past months, sending waves of panic among the investors.

As the cases now stand over 1.5 million across the world and the death toll crosses 90,000 mark (as per WHO situation report on 10 April 2020), the stock market becomes highly sensitive to the state of health.

Nevertheless, the governments across the world are putting all the efforts to flatten the curve of the Covid-19 infections. Australia has responded to the widespread crisis through effective fiscal, monetary and micro-financial measures.

The three economic packages launched by the government has totalled ~A$320 billion into the economy, including the sizable wage subsidies accounting for around 6.7 per cent of the country’s GDP. Moreover, the fiscal endeavours turn to enhance the cash influx to businesses and households.

RBA’S cash rate reduction to 0.25% and its inclination towards the buyback of the government bonds are propelled towards pushing the cash into the market. 

 

Source: ASX 

Confounded between the government’s hope garnering moves and the turmoil generated by the coronavirus, the investors are struggling to make the right investment decisions.

The trader’s confusion and their current fickle-minded state is highly evident from the sinusoidal trend prevalent in stock markets. In such a market full of volatile and unpredictable moves, sometimes the angle at which we are approaching the market heavily governs the decision.  

Amidst the unprecedented scenario, the perplexity to invest or withdraw the hard-earned bucks surrounds the thoughts of the individuals. While there is uncertainty regarding top of the bear market and duration of the epidemic, a few considerations can prove highly useful to save the investors from the distressing or regretful predicament in the future.

Let us look at the few tips that can help the investors to sail through the stock market volatility

Invest your time analysing the fundamentals

Predicting the movement through the candlesticks and lines on your laptop screen often sounds like the perfect strategy for investment. With the market volatility driven by the to and fro haphazard movement of the stock prices, the relevance of the technical analysis cannot be ignored.

Yet the technique needs to be supported by the diligent fundamental analysis for making wise ad rational decisions. The financial soundness and operational continuity can be relied to pick the signals of the probable profitable investment.

ALSO READ: How To Do Fundamental Analysis For Stock Recommendations?

Approach through a long-term plan

As the world remains unaware about the duration of the epidemic while the healthcare researchers yet struggle to find the cure, making a wild investment move by trying to time the entry and exit of the market can generate potential losses in times of crisis. However, taking cues from the history of similar world upheavals and associated stock market recovery, investors can rely on long-term prospects. The long-term plan might include consistent dividend income flows and held-to-maturity securities.

Consider Going for Diversified Portfolio

When the risk and uncertainty dominate the market movements the management of risks becomes highly critical. While the high-return risky equity investments may typically send waves of fear, the return through government bills can be beaten by the inflation.

Moreover, different sectors are exposed differently to the crisis, investing in themes that are relatively immune to the adverse demand and supply disruption may be the right strategy at the moment. Thus, staying afloat amidst such time of crisis might require a diversified portfolio.

Often the most lucrative yet hidden opportunities come in the dark times when the world is struggling. The investors can cash out the opportunities in the future while also avoiding risks through their diversified investment portfolio.

ALSO READ: Simple Ways to Build a Diversified Investment Portfolio

Avoid making Hasty Decisions

Two-day market rally and you are all set to make huge investments. Or maybe a market correction on the third day and you make the hasty market exist. The fluctuating stock movement, along with the wavering uncertainty, is expected to create a ripple effect on the investors, driving them to make hasty and often unprofitable decisions.

Amidst such time, when the next day movement is highly unpredictable, the impulsive judgments should be avoided. The wisdom, knowledge and rational sense that generally utilises sufficient time should be the anchor of the decision rather than the spontaneous emotions.

Limit your Rumour Intake

As we scroll across the social media posts, we come across a vast influx of information telling different sides of the story all leading Covid-19. However, not all stories are real, and some merely are the work of fiction (or in the current case, the doings of fear and anxiety).

Well, asking for shutting down the social media when you have already closed all the other means of physical contact in lockdown appears to be highly unrealistic. However, verification of the information or simply not trusting on the unauthentic information can undoubtedly aid in avoiding the excess panic and woes.

Moreover, when the time allows you to get more creative, or spend time with your loved ones, reducing those excess news inflows can prove to be profoundly relaxing for both your personal lives and investment decisions. 

ALSO READ: Be A Smart Investor, Escape These Myths While Investing In Stocks

As Australia, along with the other nations, fights back to maintain stability and economic growth, an investor would be better keenly but not impatiently watching the movements. Withstanding such pressure requires efforts, but with the portion of patience, knowledge and sound wisdom, even the hardest battles can be gradually won.

   
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