Mistakes you should avoid in Volatile Markets

On 30th September, the Nifty finally snapped its seven-day losing streak. This range-bound and erratic behavior, meanwhile, is not brand-new. A number of global issues have clearly made the last several quarters particularly bumpy for equity markets around the world. There is no denying that the world economy is weakening. There are significant obstacles facing the US, Europe, and China.

The war between Russia and Ukraine and the sanctions imposed on Russia, as a result, has had an international impact. It has impacted crude oil prices and brought on a historic energy crisis in Europe.

Due to the FED’s ongoing interest rate increases and the ensuing economic downturn, there is a significant possibility that the US will enter a recession.

On the other hand, China is coping with a worsening crisis in the real estate market and the widespread Covid-related lockdowns.

Many investors may feel compelled to “do something” in response to all of this. But the issue is just that. Doing “anything” frequently entails altering your investment portfolio, which can reduce your potential long-term return. It entails making errors at inappropriate times.

It is advisable to avoid making snap judgments about your investments at all times. And especially now, when the Nifty is just down 8.5% from its height and the 11-nation Euro Stoxx 50 is down 24.6% from its peak. The Sensex is 36% higher than the pre-pandemic January high, while the Dow has fallen below the pre-pandemic high. India’s growth and earnings beat globally, which is what makes this outperformance stand out. It’s crucial that you control your emotions and navigate this period of volatility effectively if you want to profit from India’s success story.

Let’s examine the blunders you should avoid making when the markets are unpredictable:

  1. Avoid impulsive decisions

Market dips and lows can lead to irrational decisions. Investors reason that selling out of equities is the best method to guarantee that losses won’t continue, yet selling frequently merely locks in losses. The truth is that an investor’s best course of action in times of severe market drops and market lows is typically to keep onto stocks or even purchase more.

Long-term outcomes may suffer for investors who get caught up in attempting to time the market and miss out on some of the major up days.

  1. Avoid letting your emotions cloud your judgment.

We are aware that it is simpler to say than to do. In uncertain times, it’s normal to feel anxious or afraid, and when the markets are booming, it’s normal to feel overconfident or even greedy. However, emotions frequently lead us to act against our better judgment. History has shown us that the market’s finest days frequently coincide with its worst days and that investors can lose a lot of money by staying out of the market.

The most successful investors are frequently those who are able to entirely divorce their decision-making process from their emotions.

  1. Limit your exposure to financial news

This “don’t” is connected to tip number 2, which is to avoid allowing your emotions to get in the way. The main purpose of financial news media is to arouse viewers’ emotions. Therefore, the risk that you will make a wrong judgment based on an emotional response increases the longer you watch it.

Rarely does the information that is widely known affect prices. If you are watching a story on TV or on the internet, keep in mind that the news is probably already factored into the stock price.