Portfolio Hitting Low During Market Volatility? Effective Ways To Safeguard Your Investments

The global uncertainties, triggered by rising tensions between Israel and Iran along with potential threats to the crucial Strait of Hormuz, have made investors cautious worldwide. Though stock markets rebounded on Tuesday after the announcement of a ceasefire by US President Donald Trump, the intensified escalation between Israel and Iran has not subsided yet.

While sharp market fluctuations triggered by domestic and international factors could be unsettling, especially when they impact your portfolio, it is important to recognise that volatility is a natural part of the investment cycle. Geopolitical events, macroeconomic environment and changing investor sentiment can contribute to short-term market turbulence.

Market volatility means how much and how quickly the prices of stocks go up and down. When the market is very volatile, prices can change a lot in a short time, either rising fast or falling suddenly.

If your portfolio has taken a hit, don’t rush into reactive decisions. Instead, take this opportunity to reassess your strategy, stay informed, and make thoughtful, measured moves. 

During market volatility, investments in equity and equity-related instruments are most likely to be negatively affected. A portfolio rebalancing, among other steps, could be helpful to minimise risks.

Market downturns can be unsettling, but reacting quickly often leads to poor decisions. Historical trends show that markets tend to recover over time. If your investment goals are long-term, such as retirement or building wealth over decades, short-term dips are simply part of the journey.

One of the biggest mistakes investors make during volatility is selling assets in a downturn. Selling when prices are low locks in losses and prevents you from participating in a recovery.

Volatility often shifts your portfolio’s asset allocation. For example, stocks may fall more than bonds, causing your equity share to drop. Rebalancing (selling some overperforming assets and buying the underperformers) helps in reshuffling your investments and asset allocation in alignment with your risk profile and investment goals.

Instead of trying to time the market, consider investing a fixed amount at regular intervals. This is called dollar-cost averaging.

A well-diversified portfolio is more resilient during market shocks. By spreading your investments across stocks, bonds, gold and other asset classes, you reduce the impact of market volatility on a single sector or asset class.

Volatility is a good time to revisit your investment plan. Consider shifting a portion into safer, more stable assets,  as per your financial goals and investment horizon.

To conclude, it’s advisable to avoid hasty reactions during market volatility. Keep a keen watch on the market conditions and take necessary steps as per your financial goals and risk appetite. It could be a prudent decision to seek guidance from a financial advisor to evaluate your portfolio in such scenarios.