How Investors Can Handle Stock Market Volatility

How Investors Can Handle Stock Market Volatility

Have you ever had your emotions toyed with? How Investors Can Handle Stock Market Volatility? Seems as if the stock market is toying with the emotions of those investors who have everything hinging on the outcome of this ongoing market correction. Investors were surprised today when the Dow gained a whopping 600 points! Talk about “ups and downs”. These swings could very well lead investors straight to the psychiatrist office. It is important as an investor to accept volatility as a natural occurrence and to find ways to deal with the emotional upsets. There are some practical steps that every investor can take to ensure that they maintain their sanity and handle market swings appropriately.

Firstly, investors should know that now is not the time to make any major decisions such as selling all losing stocks in a panic. It is very likely that you will make poor decisions in stressful situations such as these. So the first word of advice would be to remain calm and quit panicking. Hold off on making rash decisions until you have had a chance to thoroughly assess the entire situation. Speaking with your financial advisor or consultant may prove very useful since these professionals have themselves weathered much volatility in times past. They should be able to help you to put everything into perspective, to look past the current storm and to maintain your long-term outlook.

Another strategy that investors can take in a volatile stock market is to focus on company fundamentals rather than on stock prices. Companies that have strong fundamentals are more likely to survive short term periods of volatility. This is an opportunity for investors to learn how to read, understand and interpret financial statements and annual reports. Pay close attention to how fundamentals change over time. Take a look at quarterly reports as well and keep yourself informed about what is happening in the economy since whatever is happening in the economy will have an impact upon company fundamentals. Rather than selling off temporary losing stocks in volatile times, maintain your current holding and instead consider buying stocks of companies with strong balance sheets and increasing cash flows. On the other hand, if your current portfolio contains stocks that have been experiencing a losing streak for more than 2 consecutive quarters, you may consider making changes to your portfolio balance.

It is sometimes hard to remain calm in a volatile stock market when the media is everywhere painting pictures of doom and gloom all around. Try not to get emotionally caught up in all that is happening in the media and the various predictions that “experts” will make regarding how things will end up. The fact is that nobody knows how things will end. The best thing to do is to maintain your holdings, evaluate the market rationally with the help of your trusted financial consultant and maintain a long-term perspective. At the end of the day, it is best not to do anything based solely on fear of loss.