Everything in this world is not linear (meaning in a particular direction only without twists and turns). Even in our day to day lives we have ups and downs. Some days of the week you feel contended, there is minimal stress, your boss or colleagues treat you well and you feel proud. Then there are those days when you feel low, left out or ignored, work pressure along with family pressure; things just don’t go your way. Such is life, it is non-linear; it gives you joy, happiness but not without some doses of sorrow, unhappiness, etc. But, interestingly this non-linearity adds the much needed spice to our lives. Imagine a life which has only happiness, you might just get bored; or a life only and only full of sorrows, shear case of a nervous breakdown. Thus, this non-linearity gives us the much needed balance in our lives. The bad times make us tougher as life teaches us certain lessons through the experiences we take and the good times make us value the human life.
Just as our lives are non-linear the stock market or the equity market too is non-linear. Meaning, it does not move only in one direction. When the investor sentiments are upbeat, there is liquidity galore, consumption is strong, economy growth is robust; the stock markets depict a northward journey. But on the other hand, when the investor sentiments are over-casted with pessimism, liquidity is crunched, consumption theme is dampened, economic growth is dwindling; the stock market loses its ground and starts slipping down. This is what the market gurus’ mean by volatile stock markets. But this characteristic of the stock market should not be a deterrent for you to invest in equity.
Instead you should smartly make use of this volatility to your advantage by keeping in mind the below mentioned points: