Online stock market investing is a risky investment option due to its volatile nature. The fluctuation of the market can boost the investment of the person, or one can even incur losses on the same. Volatility can be termed as the behaviour of the market during crucial times such as economic changes, war situations, business news, natural forces or even the world economic crises. If you are an online stock market investor, you should always remember the basic rules to sustain your portfolio during market fluctuations. Remember to:
- Make your portfolio secure - Designing a portfolio is what you may find challenging. Still, you should develop your funds and assets so that they can sustain through the volatile markets, such as having defensive stocks, some commodities and such.
- Invest when the market is down - The best time of investment as termed by the world’s best investors is when the market crashes. You should buy the best and most expensive stocks when the markets are low because when they stabilise, you get profits on the stock.
- Don’t make emotional decisions - You should remember that volatility of the stock market is a temporary situation and, in the long term, will not affect your portfolio; thus, you should always hold onto your investments through the phase.
- Make small corrections - Sometimes, a single stock can crash the whole portfolio, and to save oneself from incurring a huge loss, you can make small corrections to your portfolio by lowering the holding of some particular stock and increasing the holdings of defensive stocks.
- Always keep liquidity open - One should always keep your liquid cash in case of emergency and should not make the portfolio as the emergency fund. Volatility can be short term but can have long term damages if the market cannot recover. Thus to avoid that, one should always have an emergency fund separate from the portfolio.
- Make decisions according to the situation - Always assess the situation and understand the reason for the volatile market. You may get the idea if the phase is temporary and if the market will bounce back, as volatile markets are cyclic and thus can have a bull and bear market in alternation. If you are still not sure of the market, you can even take the help of a financial advisor to understand your portfolio and the market situation and then take the decision accordingly.
Corrections are a common practice in the stock market, and so is its volatile nature. If you are sure of your investment, then enjoy the buying season of the stock market or else make small changes to rectify the same and create a defensive portfolio that can withstand the winds of market change. Happy Investing!