October is Financial Planning Month, and as markets slide, it is crucial for everyone to evaluate the state of their personal finances. Since the start of 2022, markets have witnessed a decline; however, in mid-June, investors entered into the official bear market. Experts are anticipating that the bear market will end soon, with the average length of it being about 289 days. However, the economy still has many challenges, like rising inflation and hikes in interest rates.
Kavan Choksi offers expert advice for investors in a bear market
Kavan Choksi is a widely respected investor known for his profound knowledge of business management, wealth, and investments. He strategically helps businesses dealing in retail, luxury, and fast-moving consumer goods to make lucrative returns from their investments. His expertise in economics and finance has helped several companies to make sound financial choices that have not only helped them earn high profits but also gain a competitive edge in the market.
Passionate about helping others gain lucrative returns with their investments
Over the years, he has developed an intense passion for investments and enjoys assisting others in making the most out of their money. He completed his education at the London School of Economics and Political Sciences and is currently the Managing Director of KC Consulting.
According to him, in times of high volatility, investors choose to wait for the storm to pass. However, there are other proactive wealth-building strategies that you can put to use to make the bear market operate in your favor.
Evaluate the expected period of volatility that exists in the market
As an investor, the first step is to assess the anticipated period of the market volatility and see if it is temporary or if it will last for a more extended time period than expected. You must keep a close watch on VIX and check consistent readings for 20 or more days to ascertain whether the market is entering into an environment that is risky, predicting high volatility ahead. Readings below 20 show a stable environment where you can be assured there will be no unexpected fluctuations.
Move towards bonds during turbulent times
When the market volatility is high, it is prudent for you to allocate funds towards investments that have a fixed income, for instance, bonds, and stay away from equities that have a high risk. You will find that corporate earnings and other fundamentals that were strong at the commencement of the downturn got held up too.
Are there any risks of defaults?
The risk of defaults when you bank on investment-grade bonds is low. This means you enjoy the benefits of solid fundamentals, discounted prices, and high rates. This, in turn, gives you compelling returns for fixed income when the market volatility subsides.
Business expert, Kavan Choksi, states fixed income gives you more stability. It gives you extra balance to the investment portfolio and helps you to remain stable. At the same time, it will keep your money in the form of assets that are more liquid than stocks, as proved in the past.