As the world gradually returned to normalcy and opened up from the Covid-19 pandemic, many analysts and traders predicted stability in the market.
However, that was not to be as Russia invaded Ukraine and threw the global markets into chaos. Rising inflation has also created panic which contributed to market volatility. In times as this, investors & speculators both have to use caution to avoid losses arising from their investments.
So, if you are a retail investor or a trader, then what habits should you cultivate to navigate in such volatile times? Here are some points to provide you with a guide during times of volatility as we find ourselves now.
1. Have a Plan
The saying ‘’he who fails to plan, plans to fail’’ becomes important.
Here you decide what you aim to achieve from the markets and set strategies in place to actualize them. Which instruments are you going to choose? What is the time horizon of your investment? And what returns are you expecting? What is your risk appetite? You can also see an investment advisor if you are uncertain about the course to take.
Your plans here must be realistic and be cognizant of the risks inherent in the market. You should not set unachievable trading goals. As part of your plan, you can decide to diversify into less volatile instruments, learn to hedge your risk etc.
Your plan should be in line with your risk profile and your financial goals. Is the goal to protect against inflation? Then you should have a balanced portfolio to protect against that.
2. Don’t Set Unrealistic Expectations of Returns
It is really important to understand what returns you are seeking from the markets. And how are you going to achieve it?
Inflation is rising globally & the CPI number in the UK rose 5.4% YoY in December 2021. Your investments should aim to minimize the market risk & provide you with a realistic rate of return which is closer to the rate of inflation, so you don’t lose the value of your money.
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