How to buy stocks in today’s volatile stock market? 5 things to know

Global stock markets, including Indian stocks, are reeling from selling after the outbreak of the Russian-Ukrainian war. Year-to-date, the BSE Sensex and NSE Nifty have fallen 8% while the S&P Mid-cap index has corrected around 10.25% over this period. Since the start of the year, the S&P small cap index has lost around 14%. Thus, buying stocks in the current market seems tricky because a small mistake can lead to big losses in the short term.

On how to buy stocks and build your stock portfolio in today’s volatile market, Anchal Kansal, Research Analyst at Green Portfolio – a SEBI-registered portfolio management services firm, said, “Any portfolio that an investor builds must be suitable for his or her goals. Above all, a resilient portfolio will be supported by fundamentally sound companies. Companies with low debt, high management and high margins are some of the characteristics important things an investor should consider when choosing a stock in today’s volatile market.

“Cycles are inevitable and interest rate hikes are unwarranted. In volatile times like this, investors need to gradually build their portfolios and exploit mispricings and overreactions. Exogenous factors will generate short-term returns, but as an investor, a portfolio is designed for the long term. And in the long run, all that matters is the fundamentals of the business and the associated cash flow,” said Anchal Kansal of Green Portfolio.

Advising stock market positional investors to turn this challenge into an opportunity, Punit Patni, equity research analyst at Swastika Investmart, said: “The current market volatility is one of the best times to invest and investors can deploy should be avoided. The recent sell-off has made the valuation of quality companies and growth stocks reasonable. We suggest that investors take advantage of this opportunity to invest in companies with good fundamentals, solid finances and competitive advantages.

Punit Patni of Swastika Investmart added that investors can track some of the indices mentioned to build a portfolio at present:

1]Buy for the long term;

2]Investors should exercise due diligence before investing and invest in stocks of which they have a full understanding of the underlying fundamentals;

3]Diversification is essential, but too much can dilute overall returns;

4]Understand the risks by choosing small, mid and large cap stocks; and

5]Debt-free companies that have fallen less than their peers should rebound at a faster pace once the market stabilizes.

Disclaimer: The opinions and recommendations made above are those of individual analysts or brokerage firms, and not of Mint.

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