Market Volatility Strategy: How to grow your wealth even in uncertain times

In times of market volatility, investors often worry about losses and hesitate to invest further. However, experts emphasise that volatility is not a risk—behavioural mistakes are. Continuing your investment journey consistently, even during uncertain times, is crucial for long-term wealth creation. Financial experts Kshitiz Mahajan, Managing Partner & CEO-Complete Circle Wealth Solutions LLP, and Mohit Gang, co-founder & CEO of Moneyfront, in a conversation with Zee Business, shared insights on how to navigate uncertain times while staying invested.

Consistency over timing

Mahajan highlighted that investors should focus on holdings rather than short-term prices. “Whether the market is good or bad, continue investing. Don’t wait for the perfect bottom—it’s impossible to time the market,” he said. Mahajan also recommended staggered investments through SIPs or STPs, allowing investors to accumulate units over time and benefit from compounding.

Volatility is not permanent loss

Gang explained that short-term fluctuations do not mean permanent destruction of wealth. This is proven by various examples. In the case of the COVID-19 crash in March 2020, the Nifty crashed by nearly 23 per cent in just one month. The total decline from the peak in January 2020 is 38 per cent.

However, the market recovered fully within six months. Panic-selling during such periods, he warns, leads to missed returns.

Ganga also used a slingshot analogy: just like a rubber band pulled back generates a stronger forward motion, market downturns often precede rapid recoveries. “The faster the fall, the sharper the rise,” he said.

Diversification and asset allocation

Experts stress that asset allocation is a continuous process, not a one-time task. Mahajan recommends a balanced portfolio including equities, fixed income, commodities, and international exposure, with rebalancing guided by financial goals, risk tolerance, and liquidity needs rather than chasing short-term returns.

Mahajan suggested maintaining a rough allocation of 40–60 per cent equities, 10–20 per cent fixed income, 5–20 per cent commodities, with a portion in international equities. Investors should review portfolios every six months to a year or when significant life or market events occur, experts advised.

Behavioural risks and market timing

The experts noted that research shows that investor returns are consistently lower than market returns due to attempts to time the market. For example, over the last two decades, Nifty’s CAGR has been around 13–14 per cent, but the average investor only realised 8–9 per cent due to exiting during panics or missing market recoveries. Missing just a few of the top 50 market days over 25 years can significantly reduce overall returns, experts note.

Historical asset performance

Gang shared that over 20 years, a diversified Rs 1 lakh investment across multiple asset classes would have grown approximately as follows:

• Mid-cap equities: Rs 22–25 lakh
• Large-cap equities: Rs 13.7 lakh
• Gold: Rs 15 lakh
• Real estate: Rs 4–4.5 lakh
• PPF: Rs 3.92 lakh
• FDs: Rs 4.3 lakh

Flexible multi-cap or hybrid funds over the same period delivered 14–15 per cent average annual returns, outperforming most traditional investments.

Opportunity in correction

According to Mahajan, market corrections, like the recent 15 per cent drop from all-time peaks, create opportunities for investors to add to underweight equity allocations or diversify into sectors like domestic consumption, pharma, manufacturing, defence, and data centres.

Avoid chasing past winners

Investors often make the mistake of chasing asset classes that have recently performed well. Mahajan cautions that after a gold rally, some move into gold while exiting equities—then miss equity rebounds. The right approach is to stick to your allocation, rebalance systematically, and avoid Fear of Missing Out (FOMO)-driven decisions.

What investors need to know

• Continue investing consistently through SIPs/STPs.
• Treat volatility as an opportunity, not a risk.
• Do not attempt to time the market or catch a falling knife.
• Hold a diversified portfolio that matches your objectives and risk tolerance.
• Focus on wealth accumulation over the long term; short-term ups and downs are a natural part of the market cycle.

In a sense, market volatility is a friend rather than a foe for investors who are disciplined and patient and who have a long-term approach to investing.