Markets may be volatile: Why must investors ignore noise & invest for the long term?

Global markets have experienced extreme volatility in recent years, affecting investors worldwide. The COVID-19 pandemic in 2020 caused a massive sell-off, with trillions wiped off in market value within weeks. Although the markets bounced back swiftly, fresh concerns arose in 2022, with rising inflation, aggressive rate hikes, and geopolitical instability.

Meanwhile, retail investor participation surged. In India, investment accounts rose to 192 million in 2025, signifying growing confidence toward long-term investing despite uncertainties.

Such volatile days raise an essential question for investors: "Should you invest in a volatile market?" While unsettling, volatility is an unavoidable aspect of investment. All markets correct and rebound; it is just a stage in every economic cycle. This blog explores how to manage investing during market volatility effectively and emphasizes the long-term benefits of mutual fund investing, even in turbulent times.

Why Volatility is Normal

Market volatility is not a sign of failure but a natural part of investing. All markets move in cycles, including periods of growth, corrections, and recessions. These cycles reflect economic shifts, investor sentiment, and global events.

For example, the 2008 global financial crisis caused severe market declines worldwide. Despite the panic, investors who stayed invested saw remarkable recoveries in the following decade. Similarly, the COVID-19 Market Crash in March 2020 erased significant value in weeks. Yet, major indices rebounded within months, setting new highs by 2021.

The Nifty 50 index is a good proof of this resilience. From May 2019 to May 2024, it has delivered an annualized return of 16.3% despite large swings in between. Its annualized standard deviation of 19.03% indicates how volatile the markets are.

These facts show that long-term growth remains intact while volatility feels uncomfortable. Thus, disciplined investors seize the chance to buy significant assets at reasonably low prices whenever these short-lived price falls appear.

The primary lesson: Volatility is part of the long-term investment journey. Investors must avoid emotional reactions and have faith in the process to benefit from eventual market recoveries. 

5 Strategies for Volatile Markets

Volatility is inevitable, but investors can adopt proven strategies to manage risks and strengthen long-term outcomes. Implementing these techniques sharpens your investing during market volatility and reduces emotional mistakes.

1. SIPs (Systematic Investment Plans)

SIPs use dollar-cost averaging, spreading investments across market ups and downs. This reduces the risk of investing a lump sum at the wrong time. Besides, SIPs encourage discipline and automate investing, helping investors stay committed through volatility. Over time, they also lower the average purchase cost of mutual fund units.

Investor confidence in SIPs remains strong. In March 2025 alone, SIP inflows reached ₹25,926 crore, highlighting the growing trust in systematic investing as a long-term strategy.

2. Defensive Stocks

Defensive companies, including utilities, healthcare, and FMCG sectors, tend to create robust hedges during uncertain periods. They provide necessary services with steady demand irrespective of the economy's ups and downs. Defense stocks usually yield dividends regularly, offering consistent income against overall portfolio risk.

Defensive sectors also tend to be less volatile in price, helping counterbalance losses from higher-risk growth stocks. Including these in your portfolio can protect capital while offering moderate growth potential.

3. Rebalancing

The movement of the markets can lead your asset allocation to change as time passes. Periodic analysis and rebalancing of your portfolio returns it to the intended ratio of equities, debts, and other asset classes. Through this, your investment remains in sync with your risk appetite and long-term goals and avoids an overconcentration of any asset class. It's advisable to periodically review your portfolio, trim overperforming assets, and reinvest in undervalued sectors. This would instill a disciplined long-term investing approach and lower risk exposure.

4. Diversification

Diversification of assets consisting of stocks, debt instruments, gold, and global markets helps reduce risk levels. If one segment experiences a setback, the whole portfolio doesn't suffer. So, when the markets are volatile, diversification becomes the core of a long-term investment approach.

When you include uncorrelated assets in the portfolio, they help smooth out returns. Assets like gold or debt instruments tend to perform oppositely during equity declines, balancing the portfolio.

5. Focus on Fundamentals

Investing in fundamentally strong businesses becomes even more crucial in unpredictable markets. Seek out companies with strong financials, a track record of successful leadership, and steady profits. By concentrating on quality, you can ensure that your portfolio can endure market turbulence and participate in subsequent recoveries.

During declines, funds concentrating on strong fundamentals, such as the DSP Value Fund and the Parag Parikh Flexi Cap, have done better than their counterparts. Quality investments are more likely to recover quickly when markets settle and give resilience.

What Not to Do

Investing during market volatility requires a disciplined mindset and a well-structured strategy to avoid costly mistakes. However, many investors fall into avoidable traps that can undermine their long-term success. Here are critical mistakes to avoid:

1. Emotional Decisions

Market corrections often trigger fear, leading investors to sell holdings in a panic. Panic selling locks in temporary losses and prevents participation in market recoveries. Emotional decisions derail long-term investing strategies and weaken portfolio growth. Staying calm and focused is essential, even during sharp market declines.

For example, SIPs that started in 2018 experienced setbacks during the COVID-19 crash but fully recovered and grew by 2023. This demonstrates that patience through volatility can deliver strong long-term results.

2. Frequent Portfolio Checks

Continuous viewing of investments creates more anxiety and encourages impulse behavior. Constant market-watching tempts investors into impulsive decisions that often hurt their long-term returns.

Corrections in the market and long-term investing require patience. Avoid obsessing over short-term market moves - stick to your long-term strategy.

3. Chasing Hot Trends

Reacting to short-term news and following market fads can damage your portfolio. Popular trends often peak quickly, leaving latecomers exposed to sharp declines. Instead of chasing momentum, focus on fundamentals and proven strategies. Long-term investors ignore market noise and stay invested in quality assets.

Learning how to handle market volatility includes knowing what to avoid. Avoiding these common mistakes strengthens your financial discipline and enhances long-term wealth creation.

Conclusion

Market volatility challenges every investor, but history has confirmed that long-term investment strategies bring the highest returns. Wealth is built by focusing on financial goals instead of reacting to short-term noise.

By the end of 2024, retail investors held 26% of the Indian stock market, higher than foreign holdings at 17%, a sign of growing confidence in discipline-based long-term investing. Avoiding emotional mistakes, ignoring market noise, and committing to regular investments are essential for lasting success. Compounding rewards patience and discipline; it does not reward perfection.

The benefits of long-term mutual fund investing become clear when you let time do the work. Start your journey today with AssetPlus and invest confidently for a stronger financial future.