Should you worry about volatility?

Should you worry about volatility?

Henil Shah
/ Categories: MF Unlocked

Volatility in the markets is often confused with ‘risk’, but in reality, volatility is not in itself a risk but an anticipation of a risk event or reaction to the risk events. You generally observe the situation of high volatility in assets where prices are driven by investors sentiments or there is no surety as to where a particular asset is going. Volatility represents sharp movements in the performance of an asset.
 
Investors often consider volatility in a negative sense, as they think are losing money and therefore, they redeem their units from the funds that are not performing. Getting out of or entering into a particular fund must depend on your financial goals. Say, your investment goal is for long-term, then there are chances that the performance of a particular fund may bounce back. However, the reason of moving out of the fund must not only be the volatility, but you should also look at the performance of the fund manager, how the fund has performed in such volatile phase in the past, the risk that it carries compared to its peers and benchmark.
 
So, if you have a financial plan in place and investments are made considering your risk profile and tenure for which you are making investments, then you must not worry about the volatility, as the volatility would be present in the short-term but would ease down in the long-term. As the equity MF investments are made with a longterm view, short-term volatility must not affect you. However, if any fund that you had invested in with a particular intent is not going as per your intent you should exit that fund.

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