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Keep your investment portfolio in good health

Keep your investment portfolio in good health

May 25, 2020 | 11493 Views

Market volatility is a part of equity investing; having said that, the intensity of volatility has significantly increased as a result of the COVID-19 pandemic. Stock markets across the world have been on steep roller coaster rides, which has made investors’ stomach churn with anguish at every fall and then with euphoria at every rise. In this situation, StockAxis suggests five strategies to keep your investments in good stead.

  1. Don’t panic
    Any investor will have fear in his heart when he sees the market drop steeply. Most investors rush to the markets to sell their holdings to cut their losses. It’s important to avoid giving in to panic. Stay objective. If you have quality stocks in your investment portfolio, companies that are industry leaders and will continue doing well, stay invested. In fact, take it a step further; invest more in such industry leaders in a graded manner at every downturn.
  2. Think long term
    Every crisis encountered in the past has led to the stock markets losing value over the short term. Fear dominates the thinking of market players, which results in steep drops in stock prices. Even the best of companies see a fall in valuations, which may not be justified. However, history has also repeatedly shown that after every crisis, there is a recovery, and over the long term, markets have not only reverted to the mean, but have moved further up on the valuation curve. This means, think long term with respect to your investments. Avoid reacting out of fear; think objectively.
  3. Never settle for second best
    A growing industrywill see the stocks of most of its players rise along with business expansion of the group. However, the leader of the industry will not only see a higher appreciation of its stock, the appreciation will also sustain. As against this, all players below the leader will quickly falter at every challenge the industry may face, thereby losing valuation quickly. Smart investors understand this and prefer to invest in leaders even if they have to pay a premium for the stock.
  4. Assess the market direction
    You may have heard the phrase “time in the market is better than timing the market” but if you’re wrong about the direction of the market, and that direction is down, three out of four of your stocks will plummet along with the market averages, and you will lose money big time.

    Assessing the market direction and taking the necessary action to protect your gains is smart investing.
  5. Active review
    Stock market volatility continues apace and is likely to remain elevated for the next few months as the world fights to contain the Covid-19 outbreak. The economic hit will also continue as shutdowns and restrictions on movement persist, with some sectors and industries feeling acute pain while others weather the downturn or even thrive. A passive investment approach in the current environment means owning some or many of the companies that are not likely to do well or may even fail to survive. An active approach to investing – like our MILARS Portfolio Advisory Service – means taking a more analytical approach to owning stocks that can survive the crisis and perhaps even emerge stronger during the recovery. Now seems to be the right time to be an active manager and to upgrade your portfolio.

    Engaging an experienced and research-driven investment advisor will take you a long way towards wealth creation.
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