Use market volatility as an investment opportunity

We often get worried about volatility in equity markets. But volatility is an inherent nature of markets and hence, an opportunity to make higher returns. The question is, how to make good use of this inherent nature. We often hear: “Buy low and sell high”. But who can actually define these two points?

What works for someone may not work for another. So what really works to tame this volatility in your favour is to inculcate discipline in your investment style and pattern. Here, are some broad pointers for investors:

• Define your horizon. The definition of long-term is different for each one of us
   
• Define your financial goals and work on an asset allocation model between equity and fixed income
   
• Do not buy at every low because we don’t what is the actual low
   
• Invest through Systematic Investment Plans (SIPs). The rupee cost averaging is an unbeatable champion to tame this inherent quality of markets
   
• Invest at least for a 10-year market cycle. Historically it has delivered
   
• It is always advisable to take market exposure through Mutual Funds. They provide diversification, and professional management
   
• Can invest in a 70:30 ratio, 70% through SIPs and 30% through lump sum

Every significant period of market correction is followed by period of higher returns. Hence, you must remain invested while the markets are volatile. Finally, make this inherent nature of markets work in your favour through a disciplined investment approach.

The writer is  chief business officer, Indiabulls Asset Management Company Limited