The stock market can behave like a rollercoaster. For investors with a low appetite for risk this process can seem stressful. However, like a rollercoaster itself, often the risk is one more of perception than reality.

Some simple investment advice on how to cope with a rollercoaster stock market.

1.     Don’t Panic

Manage your emotions and do not pay too much attention to the market itself or what most other investors are doing.

The stock market will rise and the stock market will fall, but a good investment doesn’t change in value just because panic, mania and fear are stalking the markets.

2.     Take A Value Investing Approach

Buy shares in great companies for a good price, and forget about it. Always attempt to build a margin of safety into every investment.

3.     Buy Quality

‘Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.’

Warren Buffet.

Be an intelligent investor and invest in quality great companies only. A quality company will be less likely to suffer from adverse market conditions and economic shocks such as a recession.

A company like Coca Cola would be a good example of a quality business. Sometimes the share price of Coca Cola is cheap, sometimes expensive. The best time to buy is when the rollercoaster market is on a dip, or to put it another way, buy when most investors are not.

4.     Apply Pound Cost Averaging

Invest a little and often. This way you will manage your exposure to volatility and risk as well as maximising the opportunity to exploit volatility in share prices more flexibly by not investing all of your assets in one lump sum investment.

5.     Look For Dividends

Target great companies that can sustain paying relatively good dividends. If you can time buying into these shares on a rollercoaster dip you may be able to combine both a great price for a great company with a very good dividend yield.

Dividend payments offer the investor an income in good times and bad.

6.     Diversify

Stock markets anywhere in the world will be volatile, sometimes at the same time and sometimes not. By investing in a diversified portfolio you will limit your exposure to any one company, sector, or country, and in doing so, once again manage your risk.

By following the above principles amongst a basket of others, the investor who is nervous about market fluctuations, risk, recessions and volatility may find enough piece of mind and confidence in their investments to get a good nights sleep.

Jamie E Smith is the author of Making Money From Stocks And Shares

This content was provided by one of our users, Jamie