In a volatile stock market, where prices change rapidly, there are two main strategies that can deliver good long term gains to investors. The aim of any investment in the Indian shares market is to make a profit and make money on your investment. If the market displays long term stability, making money can take a long time, however when the Market is volatile, and changes daily, you need to keep on your toes about deciding when to buy and sell in order to get the best returns.
The general trend in the Indian stock market is upwards, and by leaving your money in a single fund over time you can make gains, but this is a lengthy process, and by following this route, you will miss out on many short term gains that properly managed, can give you a massive rise in your investment portfolio over time.
A fast changing market gives you plenty of opportunities to buy and sell, taking advantage of the best price for either action, but you need to commit yourself to spending serious time poring over your portfolio to discern the optimum moment for making your move.
The first rule in a volatile share market is to diversify. This will minimise your overall risk. You should invest in a wide range of different shares that can act as protection against other sectors. Do not put everything into the highest risk areas. Invest in long established companies that offer stable results. Look at companies listed in the Bombay Stock Exchange and National Stock Exchange (BSE and NSE) and invest a portion of your money in businesses that are low risk but profitable, such as banks. These will offer long term security, and allow you to cushion the rest of your investment.
Fast changing stocks such as those in the travel and technology sectors traditionally do well seasonally, but are also affected significantly by international news events. It is important to recognise the long term trends that underlie short term volatility, and position yourself to take advantage. For example, the stock value of travel businesses tends to rise in the third quarter of the year when they have their most profitable seasons, while it will fall in the first, when demand is slack. Therefore, a good stock tip is to use these seasonal variations to buy and sell in this sector.