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Financial Planning
Turbulent Markets? Protect your wealth with these tips
The ups and downs of the market should not erode your wealth. This post will provide some proven tactics that will help protect your wealth from volatility.
Key takeaways
- Diversify your investments across different asset classes.
- Think Long-Term and stick to your plan despite short-term ups and downs.
- Keep enough cash for 3-6 months of expenses.
- Rebalance your regular portfolio to maintain your risk level
Financial markets around the world often witness volatility. Across continents, there are geo-political conflicts and trade wars. All of that creates economic uncertainty as it is hard to evaluate the impact on growth and inflation. It effectively means it is also difficult to estimate the future profit growth of companies that affect your investment. This is often referred to as the VUCA world, which stands for volatility, uncertainty, complexity, and ambiguity.
In this blog, we’ll explore practical strategies on how to handle stock market volatility, keep your emotions under control, and protect your wealth through all market cycles.
What is Market Volatility?
When prices move rapidly between historic highs and lows, volatility rules. There are indices like the NSE India VIX that measure the stock market price volatility.
For instance, on 7th April 2025, the India VIX surged by nearly 60% due to fears of an escalating trade war disrupting global growth and supply chains, triggered by China’s retaliatory tariffs on U.S. goods.
Why is it important to handle volatility wisely?
Understanding how to handle stock Market Volatility is essential for achieving your financial objectives. Many investors act irrationally and end up doing things that can hurt their wealth. For example, during the COVID-19 pandemic, significant herding behaviour was observed in the Indian equity market, where investors followed the crowd, leading to increased market instability.
Fortunately, there is good news. There are strategies that may help you stay focused and calm during market turmoil, although their effectiveness can vary and is not guaranteed. Your knowledge is your best armour for protection in times of volatility.
Here are three things to note:
Diversify your portfolio
There is a simple but powerful rule: diversification. Meaning, don’t put all your money in one place. As the saying goes, “Do not put all of your eggs into a single basket.” If that basket collapses, everything is lost!
So, invest your money in different investments—stocks, bonds, real estate, and commodities like gold. Even if one investment underperforms, other investments may help maintain balance in your portfolio. In this manner, your funds will be safer, and your wealth will be shielded during market volatility.
A table for understanding how different investments typically react to Market Volatility.
| Asset Class | Typical behavior during high volatility | Considerations for investors |
|---|---|---|
| Equities (Stocks) | Prices may fluctuate significantly; higher risk and potential for loss or gain. | Diversify holdings; consider defensive sectors like utilities and consumer staples. |
| Bonds | Generally, more stable; prices may rise as investors seek safer assets. | Focus on high-quality government or corporate bonds. |
Focus on long-term
Sometimes when the market falls, investors get stressed and make wrong decisions. But remember, investing is a marathon, not a race. In the short term, stock prices will fluctuate, but in the long term, if you look at history, prices often rise. So, focus on your long-term plan and don’t take any hasty decisions by getting overwhelmed by short-term problems.
Case study: Covid-19 market crash and recovery
- In mid-Jan 2020 the Nifty 50 index was trading around 12,300 points
- Due to fear of global pandemic fears and economic uncertainty, the Nifty 50 index fell sharply by about 38% to 7610 points.
- From April 2020 onwards, the index began a steady uptrend.
- Nifty 50 even rose to all-time high at 26178 points, marking rise of about 244% from low.
Key insight: Global markets experienced significant declines. However, investors who maintained their positions and continued with their long-term investment strategies often recovered their losses and realised gains in the subsequent years as markets rebounded.
Regularly adjust your investments (rebalancing)
At times, stocks grow too much, and your portfolio becomes heavy on them. But if the stock market falls, then more of your money can be at risk.
So, check your investments from time to time. See if the balance of stocks and bonds is right or not. If stocks have become too much, then shift some money to bonds or safer investments. This process is called rebalancing. If you maintain balance regularly, then the risk will remain under control, even when the market is going up and down.
For example, your target asset allocation is 60% equities and 40% bonds. If a stock market rally increases the equity portion to 70%, rebalancing would involve selling some equities and purchasing bonds to restore the original 60/40 allocation.
Conclusion
Market ups and downs are a part of the investment journey. But when you understand how diversifying your investments can help manage the risks and how a long-term view may ease the impact of short-term market swings, staying focused on your financial goals becomes easier. With the right knowledge, you can approach investing with more clarity and confidence even when the markets feel uncertain.
Disclaimer: This article is intended solely for informational purposes. The views expressed in this article are personal. Axis Bank and/or the author shall not be liable for any direct or indirect loss or liability incurred by the reader arising from reliance on the content herein. Readers are advised to consult a qualified financial advisor before making any financial decisions. Axis Bank does not endorse or guarantee the accuracy of any third-party content or links included in this article.
Mutual Fund investments are subject to market risk. Please read all scheme-related documents carefully. Axis Bank Ltd. is acting as an AMFI registered MF Distributor (ARN code: ARN-0019). Any purchase of Mutual Funds by Axis Bank’s customer(s) is purely voluntary and not linked to availment of any other facility from the Bank. This content is for informational purposes only and does not constitute investment advice. Past performance is not indicative of future returns. Readers are advised to consult a qualified financial advisor before making any investment decisions. Terms and Conditions apply.
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