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How to manage your portfolio in a volatile market?

Since the year 2022 began, volatility has been the theme for global markets. With Russia’s invasion of Ukraine, surging inflation levels, the ongoing pandemic, an increasing dollar index, and a looming energy crisis, the stock market has been seeing sharp price movements. In such a case, it’s important to take a few steps to manage your portfolio and mitigate risk. Here’s what you can do:

Diversify across levels

Diversification is the most effective strategy when it comes to managing your portfolio in a volatile market. The first level of diversification is to invest in different asset classes. While equity investments would be your primary focus for wealth generation, investing in debt, real estate, gold, etc., can help hedge market risks. The second level of diversification is to diversify within each asset class. When you are investing in the stock market, look at different investment instruments you can do that through. In addition to directly investing in stocks, you can also invest in equity mutual funds, exchange-traded funds, etc.

Look at adding value stocks

When the market is volatile, you have the opportunity to add stocks of good companies to your portfolio but at a discounted rate. Look at companies with strong financial fundamentals whose stock is trading at a lower price relative to its value. This will allow you to benefit significantly in the way of capital appreciation and set up your portfolio for future gains. It can be tricky to accurately identify such stocks, and this is where the services of an investment planner come in. When you seek custody planning services, experts help build your portfolio in such strategic ways to ensure that market opportunities are well-utilised.

Add international exposure

Another way to diversify your portfolio is by adding international investments. The domestic market is not perfectly synced with the markets of other countries. Hence, the timing and intensity of the impact of different macroeconomic factors will differ. Other than diversification, investing in international instruments can also help you benefit from currency fluctuations. Depending on your current portfolio, you can look at allocating 5% to 15% to international instruments.

Rebalance your portfolio

According to your investment strategy and financial goals, you would have maintained a certain proportion of equity and debt assets in your portfolio. But then the markets are volatile, it’s possible that your equity exposure may have changed and hence it’s essential for you to rebalance your portfolio. In a volatile market when nothing is certain and prices are sharply changing, it can be difficult to figure out asset allocation that aligns with your initial goals. This is another area where the expert services of an investment planner can help.

Every investment you add to your portfolio comes with its own risks. To build and manage a portfolio that can handle volatility requires you to look at your investments holistically and see how each complements the other in the risk-reward aspect. For this, you can seek custody services provided by your banking institution. This will include investment planning, fund accounting, and record keeping. When you take the help of custody planning experts, they will ensure that your portfolio remains consistently aligned with your long-term goals irrespective of the current market scenario.