How to Handle Stock Market Volatility in 2022

Are you worried about the stock market volatility and unsure how to handle it?

Let me share how a long term investor can use the current market volatility to his advantage, further, how I am dealing with it right now.

So without much ado, let’s begin.

Why is Stock Market So Volatile?

Do you wonder why stock markets are so volatile?

One country decides to attack its neighbour, and the Indian stock market is down by 5%. The next day, still the attack is on, but we are up by 3%.

Can anyone explain what is going on?

Similarly, Corona Virus made the Indian stock market correct by 40%. Nifty from the levels of 12k came down to 7.5k in a matter of 4 to 5 weeks.

Nothing changed to the virus, yet the Indian stock market was back from where it started falling.

We may know the answer is liquidity, but the question is, why stock markets are so volatile?

The question is, WHY?

The way I see it is, stock markets are future-looking. So they try to discount the future.

So anything unknown in the market makes it jittery.

• What is the effect of the virus – market falls
• How will the war impact the world – market falls

How to Handle Market Volatility in 2022?

Nifty has been in a range of 2000 points for the past seven months. Below we see the chart of Nifty 50 for the past six months.

There is no direction.

Further, there is a gap down one day and up the other. So it is killing traders on both sides.

The good news is investors have the upper hand. There are three ways to handle this volatility.

1. Do Nothing – Don’t look at your stocks. They should be of high-quality stocks for anyone to do nothing.
2. Buy the Dips – Add more for every 5% correction in any of your stocks.
3. Sell on rising – For days when the market is higher, sell stocks you don’t want to own for the next decade and raise the cash levels.

I am doing all three.

For stocks like Divi’s Labs and Pidilite, I am doing nothing.

For stocks like Clean Science Fine Organics, I am buying the dips.

I am offloading to raise cash levels for stocks like TTK Prestige that I don’t want to own for 10+ years.

Some Questions Regarding Volatility of 2022?

Some blog readers have asked me questions related to the volatility of 2022. So let me answer them here.

Final Thoughts

The market has always been volatile and will always remain volatile. Therefore, the investor must handle the stock market volatility and make it an advantage.

Many books and articles online say that you don’t have to pay attention to the volatility. The problem is when you have your hard-earned money invested, you can’t ignore it. It’s practically not possible.

Not watching your portfolio take a 50% hit when you have to also remain at home doing nothing isn’t practically possible.

One can remain calm if one has invested in top quality companies because I can say for sure that only being a long-term investor is not enough.