Stock Market Volatility: Should You Hold or Exit? 

Investing in the stock market is not for the faint-hearted—especially during times of high volatility. Every investor has asked this question at some point: “Should I hold or exit during market turbulence?” 

Understanding the mechanics of volatility, historical trends, and investment psychology can help you make an informed decision. Let’s break it down. 

What is Stock Market Volatility? 

Volatility measures how much and how quickly the price of an asset, like a stock, moves. In simple terms, it’s the ups and downs in the market. It’s often tracked by the Volatility Index (VIX), sometimes referred to as the “fear index.” 

• VIX Example: A VIX level of 20 suggests moderate volatility, while a VIX above 30 indicates significant market fear. During the COVID-19 crash (March 2020), the VIX peaked at over 82, the highest since the 2008 financial crisis. 

Historical Performance: What Does Data Say? 

History has repeatedly shown that staying invested in the market yields better long-term returns than trying to time it. 

Scenario	Investment Value Over 20 Years (₹1,00,000 Invested in Nifty 50)
Stayed Fully Invested	₹9,60,000
Missed 10 Best Days	₹4,40,000
Missed 20 Best Days	₹2,20,000

Source: NSE India (Assuming investment from 2003–2023 with 12% CAGR) 

Takeaway: Most of the market’s biggest gains happen in short windows—if you’re not invested, you miss them. 

When Should You Hold? 

Holding your position might be wise if: 

1. Long-Term Goals Are Intact: If your investment horizon is 5+ years, short-term dips are normal. 

2. Portfolio Is Diversified: Diversification reduces risk exposure. If you’re spread across sectors, you’re likely safer. 

3. You’re in Equity SIPs: SIPs benefit from volatility via rupee-cost averaging. 

4. No Urgent Need for Funds: Avoid emotional exits if you don’t need immediate liquidity. 

5. Valuations Are Attractive: Volatility often brings stock prices below intrinsic value—ideal for long-term buying. 

When Should You Exit? 

There are legitimate reasons to exit too: 

1. Company Fundamentals Have Changed: Poor earnings, governance issues, or changing business models are red flags. 

2. Rebalancing Needed: If your asset allocation is skewed (e.g., equities ballooned from 60% to 85%), trim and reallocate. 

3. Goal is Reached: If you’re close to a financial goal (like buying a house), shifting to safer instruments like debt funds or FDs makes sense. 

4. Overexposure to a Sector or Stock: Concentrated bets may need trimming in turbulent times. 

Behavioral Finance: Why Investors Make Mistakes 

• Loss Aversion: Studies show investors feel the pain of a loss twice as intensely as the joy of a gain. 

• Herd Mentality: When markets fall, many investors sell just because others are selling. 

Tip: Stay rational. Panic selling rarely benefits long-term wealth creation. 

What Can You Do During Volatility? 

1. Review Your Risk Tolerance: Can you stomach short-term losses? 

2. Revisit Your Goals: Align your investments with your timeline. 

3. Stick to Asset Allocation: A 60:40 equity-debt ratio might help reduce risk. 

4. Consider Defensive Stocks: FMCG, pharma, and utilities tend to perform better during downturns. 

5. Invest Through SIPs: Continue or increase SIPs in quality mutual funds when markets dip. 

Expert Advice: Don’t React, Reassess 

“Volatility is not a signal to sell—it’s a signal to evaluate.” 
— Rits Capital Investment Team 

During every major crisis—be it the dot-com crash (2000), the Global Financial Crisis (2008), or the COVID crash (2020)—markets bounced back stronger within 1–2 years. 

Final Word 

Instead of asking “Should I exit?”, ask: 

• Am I investing for the long term? 

•  Are my financial goals still the same? 

•  Has the investment’s fundamental story changed? 

If your answer is yes to the first two and no to the third—you likely should hold and ride it out.