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Key Learnings:Basics of Stock MarketFinancial Market
After knowing about the basics of volatility, you must be wondering, that as an investor, how you should deal with market volatility.
Well, because of the volatile market, many investors sell their stocks at low prices, often incurring losses.
Because of uncertainty, and to avoid the risk of more losses, most of the investors sell and tend to make wrong investment decisions.
In this video, we will discuss 5 investment strategies through which you can deal in the volatile market:
First is Avoid Herd Behavior:
Most of the investors, in the period of a volatile market, sell their stocks in groups, seeing each other, which causes panic selling, and makes the stock prices fall more. This behavior is often referred to as the herd or ostrich behavior.
But, instead of following other people and the rumors and noise that prevails in the volatile market, one should remain calm and keep following his own trading strategies.
Instead of following the crowd, one should remember that the volatile market offers many opportunities to buy stocks for long term investment.
One should stick to the principles of investing and keep faith in the markets and the companies where money is invested.
Next strategy is Buy stocks of quality companies:
One should focus on buying the stocks of the quality companies.
By quality companies we mean companies having strong fundamentals as these types of companies, in the volatile market, are more resilient, and safe for investors to put money in.
The prices of the companies are relatively stable and, to a large extent, driven by quality and clean management.
Next is Start researching for undervalued stocks:
The volatile market gives us a great opportunity to buy undervalued stocks. This is the period where you can start researching for the undervalued stocks and investing in them.
Stocks whose prices are less than their intrinsic value can be termed as the undervalued stocks.
You can identify these undervalued stocks by analyzing certain fundamental parameters like the PE ratio, price to book value ratios and so on.
Basically, one should pick up stocks that are fundamentally strong, and their earnings keep on increasing every year.
Next is Pick up dividend stocks:
It is always better to invest in those stocks which pay high dividends.
In this way, even if your prices fall, you can earn by receiving the dividends from those stocks which consistently pay dividends.
So one should invest in those stocks which have a stable or rising dividend payout ratio.
Last strategy is Build a diversified portfolio:
It is important to build a diversified portfolio. One should invest in the stocks of different sectors in order to make a well-diversified portfolio. Other than building a diversified portfolio, it is also important to maintain that diversified portfolio.
The investors should not panic during the volatile market but keep their mind in analyzing good undervalued and stable dividend-paying stocks. A volatile market is a right time to invest in the equity market for long term investments.
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