Investment into any market comes with risk, but in a year where stocks have started on their worst footing since 2016 in light of recent pullbacks from the Central Bank, many investors are finding themselves staring down the barrel of bear markets that make investment losses look a lot more likely.

Characterized as a market that experiences prolonged price declines during which security prices fall by 20% or more, the general volatility of a bear market isn’t something that any investor embraces. However, with stocks already struggling in the wake of the pandemic, and with current conflicts in Ukraine quickly sending risk assets like stocks tumbling even further, dealing in volatile markets is becoming increasingly common across even promising investor portfolios. 

While this doesn’t necessarily mean that losses are inevitable even as markets continue to struggle, it does mean that investors need to put strategies in place to handle the volatility of markets overall. Here, we consider some of the most viable options for immediate action.

Holding position

Holding a position in a volatile market can be daunting, but there are equal risks of loss involved in pulling money out of a market that could still rally. This is especially true considering that high volatility in most markets is short-lived, and can even be followed by periods of growth. Investors who hold their positions during these periods will generally look past short-term market fluctuations, instead focusing on the longer-term of their investment prospects, and the bigger picture of markets overall.

Hiding in high-dividend stocks

According to authorities like Forbes, high-dividend stocks provide an effective place to hide from volatile markets because they act as a cushion that ensures a steady dividend income. Dividend stocks that pay investors a set amount each quarter regardless of market fall or volatility can especially provide the overall security necessary to either deal with market losses by pulling volatile investments or buying time to wait for market-wide turnarounds.

Looking into liquidation

Liquidation involves the selling of assets before company closure to avoid investment losses that may occur otherwise. While this can still result in some losses on the part of investors, it can still be a viable option for reducing risk if a market has taken significant hits, or if company mergers or acquisitions have been hinted at. In generally volatile markets, turning to assets that they can liquidate quickly can especially help investors to rebalance equities that have taken a hit elsewhere.

Taking a risk with leverage

Leverage is a trading mechanism that investors can use to increase market exposure by paying less than the full amount for an investment using capital borrowed from a broker. Options trading, futures contracts, and buying on margin are all examples and, when done well, this can be a viable way to magnify gains relatively quickly in even volatile markets. That said, there is also a higher level of risk involved, with the equally fast possibility of losses here holding the potential to wipe out entire investment profiles.

Making good decisions

When you take each of these strategies into account, it is clear that dealing with volatile markets always comes back to one thing – your understanding of what’s happening across your investment portfolio, and what that means for your prospects overall. By providing a simple way to track and control your wealth, the Claritus app is therefore an invaluable tool for helping you to make good decisions during the most volatile of periods. For investors worried about current market changes, signing up for what Claritus has to offer today is an especially wise way to provide some much-needed investment peace-of-mind that keeps losses at bay once and for all.