Investing in the stock markets during tough times is certainly not easy. But you can rejuvenate your portfolio, with these few defensive moves you can make to meet your goals.
#1 Hold cash
If you see a further downside in your stocks, the easiest strategy to follow would be to cut positions across your equity holdings and hold cash to the extent of about 10-15 per cent of your equity portfolio. This not only reduces the extent of losses, but provides you with liquidity to invest when stocks are at rock-bottom prices.
#2 Stick to Large Capitalization Stocks
Large cap stocks typically do not fall as much as their mid cap counterparts. At any rate, large-caps usually are the first to recover when market conditions start improving. Switching over to large-caps is a prudent measure in a volatile market.
Quality mid-cap stocks deliver higher returns than their large-cap counterparts over the long term. However, holding large positions in mid-cap and small-cap stocks exposes your portfolio to further downside risks.
#3 Buy Defensives
Defensive stocks or sectors refer to those stocks which have a low association with the economic cycle. Healthcare and education sectors, for instance, are unaffected by the uneconomic cycle. In the recent market correction, FMCG and technology stocks have fared better than the rest of the market.
#4 Switch to Mutual funds
If your portfolio is in it’s lows, maybe its time to call for professional help. Mutual funds bring professional expertise and are able to provide diversification at a cost efficient manner.
#5 Use prudent investing strategies
When and how you invest matters as much as stock selection. Bad timing of investment in the best of stocks can be a losing proposition. If you are investing in mutual funds, consider phasing your purchases through systematic investment plans.
If you are investing in stocks directly, consider accumulating a stock by buying it in small lots. Buy small quantities of the stock, if you want to buy 100, buy 50 now and 50 after few days.
#6 Book Your Losses
Be brave, and book your losses at times. Instead of waiting for the stock to recoup its losses, try switching to another stock with greater promise.
These all measures will help you to fight and survive in the volatile market. What are the measures you think of?
Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing. Please read the Risk Disclosure documents carefully before investing in Equity Shares, Derivatives, Mutual fund, and/or other instruments traded on the Stock Exchanges.
As investments are subject to market risks and price fluctuation risk, there is no assurance or guarantee that the investment objectives shall be achieved. Past performance of securities/instruments is not indicative of their future performance. This post is only for Educational purpose.