Equity investors are truly tested when markets turn volatile. Making money in a one-way trending market is easy. It is in times of wild gyrations that the skills and discipline of investors are truly tested. We are in such a time.

Think of the market as a large jungle with myriad types of animals (read investors), each one with their own perspectives and motivations driving their actions. Because these are different, is why we have sellers and buyers for shares at the same time. Someone wants to sell to take money out for non-investing purposes, another to invest in alternative opportunities, some are simply booking profits or unwinding momentum positions. The reason to sell a stock can be numerous, same goes for buyers. The reason to buy or sell is also determined by the investment style or the kind of equity animal you are.

Here are few common kinds of equity animals.

The Agile Monkey

These are the investors who like to swing in and out of trades based on momentum. They aren’t tied to a trade or a stock, but are more in it for the thrill. While some of them manage to make a tidy sum, most fetch very little at the end of the day. They will, however, be seen jumping and cheering after a trade goes right, but will never reveal when swings go awry. They are most loved by Mr Broker, who extracts a toll for every swing, and merrily sips on his wine, while they swing from vine to vine.

Deer in the Herd

The deer is swift to act and moves in line with the trend, running with the herd, until there is a sign of danger. On spotting danger on the horizon, a deer is quick to turn around and head in a different direction. How they are different from monkeys is that they have staying power to go a long distance with the trend. They will stay with a trend till it runs and abandon the position once things start to turn the other way.

These momentum players usually reap rich rewards, if they catch a move right.

The Patient Fox

The fox is a patient hunter. It scouts its target, studies it well and then waits for the right time to pounce. The fox does keep an eye on the surroundings and the bigger picture, but the main focus is on the right target and right timing. These animals usually aren’t flustered by short-term gyrations and are usually patient investors. They are also most often happy with healthy returns, and don’t chase profits by taking on too much risk.

The Lazy Lion

These lions are lazy creatures. They don’t want to be bothered with tracking what’s happening in the equity jungle too closely. They have other things to do. They will usually just park their money passively in benchmark index funds, very often in systematic investment plans, and sleep. The returns they generate are more often than not, as good if not better than what many experts manage. No wonder, they are the lazy kings of the jungle.

Playbook for investors

Given the current market situation, the monkeys need to be more agile than ever. If they want to keep swinging, they must keep their stop losses tight and their swing sizes relatively smaller. For the deer, the big trend appears to be down and they should stay with it till it lasts. The fox will need to be more patient and much more disciplined--cutting out the noise and focusing on the specific propositions. The lions can continue to laze with their SIPs, as they will accumulate more shares when the market dives--given rupee cost averaging.