Falling market - what can I do?

Falling market – what can I do?

For those who have investments, the market crash can be something scary. feelings of fear and anxiety are very common at these times, when your money seems to be slipping through your hands. Nonetheless, must not panic. The important thing is to know what you are doing and why. In this article we will explore some ways of reacting to a market crash, in order to reassure the investor.

Do nothing during a market crash

If you are a long-term investor and are confident in your investments, should not do anything during a market crash. Unless you have a very valid reason, should not change your plans reactively. Probably when you decided to invest, you already knew that the market is volatile and that it would be subject to fluctuations. However, financial history tells us that there is always recovery. The markets will go up again sooner or later, so there’s no need to worry or panic.

Likewise, it is important to realize that, by selling your assets at a time of crash, you arewill lock this value. Let’s assume an investment of 1000 euros in a certain ETF. This fund had a drop of 30%. By selling at that time, you will sell at a loss of 30%, that is, you will block that loss. However, if he had waited for the market to recover, he could sell later with no losses, or even gains. Remember, patience is key when deciding to invest.

Also read: Investments: How to deal with market crashes

Take the opportunity to buy more assets

Sharp market drops are often caused by exceptional shocks such as the Covid-19 pandemic. These tremors can give rise to the so-called selloff – strong sales movements – motivated by panic among investors, who are looking to get rid of the assets.

Although this scenario seems daunting, for many investors is filled with opportunities. If you had your eye on certain assets, now might be a good time to buy, as their value will certainly be lower. It is certain that you will be buying assets that are falling, but this is the number one rule for investors, knowing that every market crash is followed by a recovery.

Read also: How inflation threw markets into one of the worst semesters ever

There is, however, a group of investors that should be a little more concerned with market crash situations. For investors approaching retirement age, such a situation can undoubtedly be a downer. Many people start in the investment world just to save money for retirement. If at that time the market is down, how can these people recover their investments without losing money?

While you are young, you can and should be a more aggressive investor in order to prepare for your retirement. However, as the years go by, should adopt a more conservative profile, to avoid risks.

In any case, if you’re of retirement age and you’re facing a market crash, don’t panic. Seek help from a financial advisor that can help you make the best decisions regarding your assets given the situation in which you find yourself.

Also read: 10 English terms you need to know to follow the markets

Only use money you can afford to lose

This is one of the main “rules” of investing. You should only invest money that you can afford to lose. What does this mean? That you should only use money you don’t need. It is clear that all the money we have is important, it cost us to earn and is the result of our work. However, in certain situations, there is money that is fundamental, which we cannot give up.

For example, you’re building your savings and emergency fund, and apart from that, you don’t have much more money on your side. You should not, under any circumstances, use money from your savings or emergency fund to investa. You should only use money that you will not need in the near future. Any amount that has been hoarded for another purpose already has a destination other than investments.

This rule is always important, even in times of falling markets. For those who start investing at these times and knowing that, in fact, they can be the best times to buy assets, it can be attractive to do so immediately with the “money you have on hand”. However, doing so could compromise your savings and future needs.

Also read: Saving or investing: what should I do?

Diversify your investments

You should not invest all your available money in a single asset class, sector or geography: it is important that your portfolio is as diversified as possible. So if the market goes down, not all of your investments will be affected. On the contrary, some will even be able to compensate for the failures of others. Remember if, diversification is where the gain lies.

Also read: 12 golden rules for investing in stocks

Seek an expert opinion

Being an investor is quite rewarding when your investments are booming. However, in times of stress, doubt and fear can get the better of them. As much as you are an experienced investor and confident in your decisions, sometimes, in times of decline, it is easy to make hasty and less thoughtful decisions. For this reason, it can be quite helpful to seek the help of a financial advisor.

These professionals, in addition to analyzing your investment strategy, will provide an independent perspective on the best steps to take. Remember if, a second opinion from a specialist can be valuable.

Also read: Start investing: Step-by-step and precautions to be taken

Hang tags
  • #stock Exchange,
  • #investments,
  • #markets

Finanças pessoais,Investimentos,bolsa de valores,investimentos,mercados
#Falling #market

Leave a Comment

Your email address will not be published. Required fields are marked *