How to make smart investments even amidst market volatilities

Here’s what you can do to fortify the walls surrounding your investments to make them immune to unavoidable market turbulences.

 
Investment Strategies

Uncertain volatile market movements caused due to the dynamic nature of the economic climate can affect your investments and their returns. To protect your investments from these increasing market volatilities, it is may sound best to choose a sound financial plan that is not affected by market movements at all. However, the fixed-income market has also discouraged individuals from investing because of a lower interest rate regime. In such a case what should one do to earn handsome returns but also keep their funds safe?

Diversification is the answer. Diversification is an investment risk mitigation technique you can use to minimise the risk involved in investing in equity-linked and market-linked tools. It involves investing in multiple instruments of different risk types to offset your portfolio’s overall risk and guarantee a satisfactory return. For example, if you invest your entire saved corpus in stocks, you may earn extremely well when the market is doing well, but when the market tanks, you lose everything along with the capital.

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So, after seeing what happens it only makes sense to invest part of your finances in market-linked instruments and the remaining part in fixed-income instruments like fixed deposits, PPF, government-backed investment schemes, etc. Be a smart investor and plan your investments well in advance so that you can make the most of the compounding effect!

Here’s what you can do to fortify the walls surrounding your investments to make them immune to unavoidable market turbulences.

Consider your financial goals

Your income and financial goals must form the foundation of your investments. Your investments should be aligned with what you want in the future. This will help you in deciding when to stay put and when to liquidate apart from ongoing market trends. If you’re almost about to reach a financial goal milestone, you can consider redemption to save yourself from near-term volatility. On the other hand, if the maturity is a few years later, continue investing so that your investments accrue maximum returns.

Diversify your investments to offset risks

One key rule is to never put all eggs in one basket. The next step in the plan should be to diversify your investments into various asset classes to balance the risk. This will make sure your losses in a risky investment will get compensated for by the gains you make in another safer investment. Allocating a portion of your assets, based on your financial goals, to fixed income instruments like the Public Provident Fund (PPF) or National Savings Certificates (NSC), Fixed Deposits (FD) apart from equity-linked investments is a safe strategy. Also, Real Estate and Gold have been a traditional choice of investment in our country for aeons. However, you must make sure to invest a lower portion in gold investments. Ideally, you must not allocate more than 5% of your total portfolio to gold investments.

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Take expert guidance

Amateur and first-time investors should take the help of seasoned and experienced financial advisors for planning as well as during the investment period. Investing with a secure plan in place would create faith in the power of investments. Also, counselling during a market downturn can prove to be of help to the pre-determined path to achieving long-term financial goals.

These are the few ways to ensure your investments remain safe even during uncertain market movements.