Turning market volatility into a friend requires conviction. When markets lose confidence, it translates into selling stocks without bothering about intrinsic value. The selling becomes so indiscriminate that it turns into volatility. During such times, investors must be completely focused on intrinsic value.
Focusing on the intrinsic value of falling stocks can give us some extremely attractive opportunities. The volatility in stock prices can also be heightened by the overall volatility in the market. When stock prices react to market-wide volatility and begin to ignore fundamentals, it clearly opens up extremely attractive opportunities. The past few months have seen such opportunities arise in multiple themes. The coming months will see fundamental opportunities open up from market-wide volatility.
A long-term investor must align his portfolio closer to companies rather than the overall market. Maintaining an intense focus on intrinsic value will prepare investors to buy when market volatility spikes. Focusing on intrinsic value is always a better approach than focusing on stock prices. Simply betting on falling stock prices will not give an investor the desired results. Investors must spend time assessing the intrinsic value of the companies on their wish list, set buying targets, and capitalise on the opportunity when stock prices hit their desired target price. This calls for enormous patience, ample conviction, and timely action.
The markets will demand more from investors in the coming days and reward investors who show temperament.