Every time markets turn volatile, the noise becomes louder. Red tickers, alarming headlines, and endless opinions on the social media groups flood your phone screen. And instinctively, we crave one thing. Certainty. 

We love Certainty. That is just being human and natural.

One thing about the market is that, as an eternal truth, it is uncertain, but that uncertainty only makes opportunities available. 

But here’s the paradox. Markets reward those who can operate without certainty. Uncertainty is not a flaw of the market. It is a feature of the market. And more importantly, it is the very reason opportunities exist. 

So it becomes mandatory for us to have an inviting attitude towards uncertainty, or at least accept it. Accepting volatility is not easy, but if the following five frames can help to change the thinking hat around the market –

 

5 Thinking Frameworks: To Propel Extreme Volatility

  • Being optimistic (the bedrock of equity investing) about the future is a prerequisite for investing in Equity. A belief that tomorrow is going to be better than today, that belief we have for our families, relationships, economy or social life. Like for all other things, tomorrow will unfold better – today’s confusion will be answered –time gives answers – this positivity is the bedrock when it comes to investing, too. Why abandon this belief when it comes to equity markets?

“Every Financial Decision is a reflection of what you believe about the future”

  • Being counter-intuitive – Now, after every fall, there is a rise. We all know that. How many of us understand this? How many of us act upon it? Writing this is easy, but practising is the most difficult thing in investing. The one who sees and finds the silver lining in every fall is the winner. In the 2008 Financial Crisis, the Nifty 50 fail 59% and rebounded in 15 months. Those who invested during the fall created significant wealth. The lesson isn’t new. But it is difficult.

“The opportunity does not pass Unnoticed. It passes unacted”

Regrets of not investing during times of uncertainty are real. Wearing a counterintuitive hat helps. 

  • Being in Confusion is good for a short while -At times, no one has an answer, and that confusion creates anxiety as well as opportunity. The world adapts to new ways and means. See yourself in past examples. -COVID created an unprecedented time in our lives. Valuations failed 38% – only to rebound very strongly. 

So the present war situation is one example of confusion, like a natural calamity. Global crises, wars and economic shocks often look chaotic in the moment. Confusion creates two things simultaneously. Anxiety and Opportunity. The world adapts. Businesses evolve. Markets adjust. 

  • Defining Goals – Why you are investing. What is the purpose of investing? It could be the biggest pull for staying invested. We call ‘Goal’ the anchor for your money and the most significant hack for staying focused during times of volatility.

“The right portfolio is built around your life and not market cycles”

  • Thinking Vs Reacting – We react when we are in a situation. If we step back from the situation and think about the bigger picture, we can be more logical than reactive. Take the professional opinion of your advisor to understand the situation. 

The Equity Market demands more time in the market than timing the market. How we take action or not take action in times of volatility determines the level of wealth we create. 

Extreme volatility is not an exception. It is part of the journey. The difference between investors who built wealth and those who don’t isn’t access to information. It’s how they think during uncertainty. Create Wealth. Plan Well. Live Better.