Rely on Well Defined Goals to Tide over Uncertainty

18 Oct 2019

Uncertainty is a harsh but inevitable part and parcel of our daily lives and it can give the jitters, especially when it comes to the management of one’s finances. Certain aspects of globalization can have positive benefits, but when threats of financial crisis, war, global recession, trade imbalances, etc. do occur, it often leads to talk of moving money to safer investments and increasing government deficits.

Uncertainty itself can affect the economy on both the micro and macro levels. Uncertainty on a micro-level centers around the effect on individual companies within an economy faced with the threat of a war or recession, while uncertainty on a macro-level tends to look more at the economy as a whole. This rising uncertainty can confuse even the well-informed investor. Brexit, the ongoing US-China tariff war or the US sanctions on Iran are some recent striking examples, which have led to a lot of uncertainty.

However, with a certain basic degree of shrewd and astute financial or money management, you can safely tide over such uncertainties. Some investors might decide to go on the offensive and search for companies that provide goods or services that will lead to greater or higher returns when things turn around. It is difficult to commit capital during uncertain times, but it can often result in huge rewards in the long run. 

In this blog, we will explore as to how you can safely navigate turbulence or volatility and protect your hard-earned money and investments.

Rather than focusing on the turbulence, wondering whether you need to do something now or wondering what the market will do tomorrow, it makes more sense to focus on developing and maintaining a sound investing plan. A good plan can help you ride out the peaks and valleys of the market and may help you achieve your financial goals.

For better and higher inflation-beating returns, it is imperative that you should consider adding a dash of equity investments in your portfolio. An expected increase in your income earning capacity is likely to give you undefined monetary surplus if you start your goal planning early. Improve your lifestyle by identifying this surplus and utilizing it wisely.

A well-thought out strategy of articulation of well-defined goals can provide you with several significant benefits as under:-

  • Market recovers after a downturn - Market downturns may be upsetting, but history shows that the domestic stock market has been able to recover from declines and can still provide investors with positive long-term returns.
  • Be comfortable with your investments - Having goals gives you clarity, especially under circumstances whenever the markets are correcting and you see deep red in your portfolio. Equity investments will help you with long term goals and you should remain invested for at least five to seven years to allow your investments to meaningfully appreciate. It is easy to panic and exit at a loss if you do not define your goals properly.
  • Don't try to time the market - Attempting to move in and out of the market can prove to be costly. Research studies from independent research firm Morningstar show that the decisions investors make about when to buy and sell funds cause those investors to perform worse than they would have had the investors simply bought and held the same investments.
  • Invest regularly over months, years and decades - If you invest regularly over months, years, and decades, short-term downturns will not have much of an impact on your ultimate performance. Instead of trying to judge when to buy and sell based on market conditions, if you take a disciplined approach towards making your investments, say weekly, monthly, or quarterly, you can avoid the perils of market timing.
  • Take advantage of opportunities - A market correction will rightly make you anxious if you have allocated funds to equity for a need that arises, say next year. All your goals should be long-term in nature and as a prudent measure, always allocate your regular investments to debt rather than equity. On the other hand, if you need to save for retirement which may be several years away, then allocation to equity makes sense. This is how you can take away uncertainty by defining your goals clearly and allocating your funds accordingly.
  • You can make up for the shortfall - Defining your goals clearly beforehand can help you to fill in any shortfall by cutting back on unwarranted expenses and investing higher amounts to achieve your goals.

To conclude, we can say that triggers for market volatility can come in many different shapes and sizes — policy uncertainty, earnings reports, geopolitical unrest, slowdown in growth, rising inflation, etc. - the list is almost endless. Market swings can rattle the nerves of even the most seasoned investors.

But, volatility is an inevitable and unavoidable part and parcel of investing. Instead of being worried by volatility, be prepared. Financial discipline calls for investing in your future and well-defined goals help you stay focused. You would definitely increase the probability of achieving your desired outcomes by choosing investments on the basis of quantifiable and well-defined goals. A well-defined investing plan tailored to your specific goals and financial situation can help you be ready for the normal ups and downs of the market, and help you take advantage of opportunities as and when they arise.

Founded in 2005 by new–age entrepreneur Abhishek Bansal, the Abans Group has evolved into a globally diversified conglomerate, providing expertise in Broking Services, Non-Banking Financial Dealings, Financial Services, Agri-Commodity Services, Warehousing, Realty & Infrastructure, Gold Dore Refinery & Manufacturing, Trading in Metal Products, Pharmaceuticals, Software Development & Wealth Management. The Group is a comprehensive financial and non-financial services and solutions provider, aiming to provide end-to-end solutions to its clients.