How should you shield yourself from market volatility while retirement planning?

Given the current market downturn and the fact that we may have started our Financial Independence Retire Early (FIRE) investment journey post-pandemic, one must have a proper backup plan to avoid struggling in their FIRE journey

Shailesh Khanduri
20 Apr 2023
Market Volatility Personal Finance

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New Delhi: Tough times do not last long though continued market volatility can cause investors to feel vulnerable and lose hope. Investors who began their “FIRE Journey” recently after the Covid-19 pandemic may now experience some panic as they see their portfolios bleeding red.


In the FIRE strategy, many people tend to save more in a bid to achieve their financial goals early in life. A higher savings rate allows investors to achieve financial independence sooner, though high volatility will inevitably impede the process. This also explains why one must have a proper backup plan to avoid struggling in their FIRE journey.

If you are among investors who started investing just recently, it is possible that your portfolio returns must have crashed by 10-15 per cent from the high that you had witnessed back in 2021. Apart, if you had not created an emergency fund to make way for liquidity as and when needed or were under the impression that stocks are liquid, then surviving in such an inflationary scenario may have hit your finances hard. This may translate to you either refraining from participating in the FIRE Movement, starting to invest less, or, worse yet, incur debt to cover rising expenses.

One thing you can do is to start building an emergency corpus for at least a year and a half rather than for six to nine months to avoid this unforeseen liquid shortage. This is because the emergency corpus (yields below inflation) is designed to support these critical times when rising prices, unemployment and lack of additional sources of income are out of control. In this situation, you need a lot of money to avoid negatively impacting your lifestyle and portfolio.

Also, don’t miss the returns from the rising stock market due to the innate fear inherent in the purchase and sale of stocks. Benefiting from the market is possible only when you refrain from indulging in excessive greed is a great idea, though it is certainly not a wise way to invest your money. It’s always a good idea to keep a liquid corpus in hand to tackle such difficult times. No one knows what lies in store for your future, which further underscores the need to plan and build an emergency fund. If you want to survive a crisis, set aside an emergency fund for the long term or find additional sources of income that can help you sail through such a crisis.

No doubt, you can retire early from your regular nine-to-six job through the FIRE strategy. However, for that, you must be willing to be prepared for crises with a steady stream of income.