The Signal: Look Before You Leap(out)

Nitin Chaudhary
13 May 2 minutes

Market_Volatility

The stock market is like weather conditions these days – It’s unpredictable! Volatility is a part and parcel of your investment journey.

 

Market volatility can provide investors an impression that they are losing their fortune and hence many investors do the same action when they do not see what they like. Investors tend to withdraw funds when they see that their mutual funds are not performing. 

Focusing only on entering points in markets is like looking at a half-pained picture. The flip side of the coin that one needs to consider is the re-entry, because If there is no re-entry, then there is no coin. Even a participation prize requires you to participate.
As you get more fluent with “Re-Investment Risk”, you will develop a more nuanced market behaviour. 

Investors often cite market volatility as the prima-facie reason for their exits and in turn seek safer instruments, assuming that the markets will not give but dive during their investment horizon. However, basic math tells us a different story. Let us take an example of pre-Covid and post Covid investment journey as an example:

 

As can be seen, investors who re-invested their corpus smartly achieved higher returns for their investments than those who panicked. The investor who didn’t plan their exit strategy found themselves disappointed in the outcome, whereas those who invested and re-invested in line with their plan of action yielded smarter results.

There’s a reason rocket engineers say, the rocket has to exit the planet 1st before they focus on entering space. It’s the same with your investments. If you wish to see your returns rocket, then you have to fuel up well ahead in time, navigating volatility with a focused and objective blueprint.

The dilemma of Entry-Exit-Re-Entry will always be relevant for as long as Markets continue to exist. Hence, it is imperative that investors need to consider re-entry as opposed to staying put in other traditional investments.

We at Fisdom, will continue to educate you on markets and their various anticipation and actions. We are there to address it all by being only a download away! Available on App Store and Play Store – Download Today!

If you wish to share your input or like us to write a piece on a topic of your choice, do write to us! We eagerly await to hear from you.

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