The stock market has been on a roller coaster lately. It reminds me of past bear markets for sure, which was particularly devastating for many investors, but there are some who have done quite well for themselves by investing during this time. As a result, many people are wondering whether now is a good time to invest in the market or if they should wait until things settle down. The truth is that some investors do very well during these periods while others lose money and become discouraged. Here are five tips to consider when deciding whether to invest now:
1. Keep your emotions in check.
The first step in our list of five tips for investing in a down market is to keep your emotions in check. It’s easy to get emotional when the stock market is going up—you think that it will continue going up forever, and you want to invest as much money as possible before you miss out on all the profits.
Likewise, it’s also easy to panic when the stock market starts going down— so you sell your stocks at a loss just so that you can buy them back later when they’ve gone up even more. Neither of these strategies are effective ways of investing for long-term success; instead, it helps if investors maintain an objective perspective about their investments and keep their emotions under control by remaining calm throughout both periods of growth and decline.
2. Think long term.
When you invest in the stock market, you’re buying a small piece of a company. You have no control over what happens to that company and its profits; if they do well, your investment will go up, but if they do poorly (or even just not as well as other companies), then your investment will go down. That’s why we can’t tell you how to time the market. We could make all sorts of predictions about what we think is going to happen next year or two years from now—but it’s impossible for us to determine how much money we’ll lose or gain until it’s too late! The best thing you can do is stay focused on the long term: don’t worry about short-term fluctuations in price; don’t trade or speculate with your investments; don’t try to time the market; don’t make emotional decisions based on daily news headlines; don’t buy high and sell low … instead just focus on making solid investments that have been proven to grow over time!
3. Put it all in context.
While the last few months haven’t been great for investors, it’s important to keep things in perspective. A stock market downturn is nothing compared with what happened during the Great Depression. And as long as you’re diversified and don’t invest more than you can afford to lose, a downturn should not stop you from investing altogether.
Call us and we can discuss your exact situation but some people if already invested in the market, now might be a good time to buy more shares or add new funds or ETFs that have fallen out of favor with investors but could still outperform over time. This is not blanket advice for everyone, and you should call us to talk about your investments but for some people this may prove to be great time to add to your retirement accounts.
4. Remember the market will recover.
In the past, the market has recovered from much worse than this. In 2008, the Dow was at 6,547 before it fell to 3,862 by March 2009. Then it started to rise again and by October 9th 2018 it had reached 26,828 – an increase of 513% over 10 years!
The end result was that those who kept their nerve and held onto their investments were rewarded with great returns. There is no reason why the same thing won’t happen once again in future years.
5. Invest, don’t trade or speculate.
Investing is not gambling. Investing involves buying quality assets and holding them for the long term. When you invest, you’re betting on an asset class or a company that you think will pay off over time. You’re not trying to buy low, sell high, and make a quick profit—that’s speculation or trading.
Investing is about long-term growth rather than short-term gains. This means that investors have more freedom to choose the types of investments they want based on their own financial goals without having to worry about timing the market perfectly (or at all).
However investing does involve risks just like any other type of investing so make sure that whatever strategy you choose fits within your risk tolerance levels before taking action!
In short, the market is going to recover but it might not be tomorrow or even next week. It’s up to you how long you wait before jumping back in. Just make sure that when it does happen, you don’t miss out on the next wave of growth because there will always be another opportunity for those who are willing to take risks with their money.
Risk Disclosure: Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance does not guarantee future results.
This material is for information purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. The content is developed from sources believed to be providing accurate information; no warranty, expressed or implied, is made regarding the accuracy, adequacy, completeness, legality, reliability, or usefulness of any information. Consult your financial professional before making any investment decision. For illustrative use only.
Stephen Pease, David W. Smiley and Matt Hoaglin are Investment Advisor Representatives with Dynamic Wealth Advisors dba Oxford Financial Planners. All investment advisory services are offered through Dynamic Wealth Advisors.