Let us understand in detail on stock market volatility.

Let us understand in detail on stock market volatility. Usually because of the volatile market many investors sell their stocks at low prices often incurring losses. Because of the uncertainty and to avoid the risk of more losses, most of the investor sell and tends to make wrong investment decisions. Following are the 5 investment strategies one should follow in a volatile market.

1- Avoid Herd Behavior: Most of the investors in the period of stock market volatility sells their stocks in group seeing each other, which causes panic selling and make the stock prices fall more. This behavior is often referred to as the Herd Behavior or the ostrich Behavior. 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 market and companies where the money is invested.

2 – Buy Stocks of Quality Companies: One should focus on buying the stocks of the quality companies. Quality companies means, those companies having strong fundamentals. As these types of companies in the volatile market are more resilient and safer for the investors to put money in. The prices of the company are relatively stable to a large extent driven by a quality and clean management.

3 – Start Researching for the Undervalued Stocks: The stock volatility 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 then their intrinsic values will be termed as undervalued stocks.

4 – Pick Up Dividend Stocks: It is always better to invest in those stocks which pays high dividend. In this way even if your prices fall, you can earn by receiving the dividends from those stocks which pays dividend. So, one should invest in those stocks which have a stable or rising payout ratio.

5 – Build a Diversified Portfolio: It is important to build a diversified portfolio. One should invest in the stocks of the different sectors to make a well diversified portfolio. It is also important to maintain that diversified portfolio. The investors should not panic in the volatile market. A volatile market is the right time to invest in the equity market for long term investment.