Stock markets around the world are in shaky territory at the moment. Even experienced investors don’t know when markets will turn around again. If you’re new to investing, you may be starting to panic about the current decline in global equity markets. The good news is that there are various things you can do to put your mind at rest while you’re waiting for sunnier days.
Here are our 4 top tips for surviving the current market slump.
1. Don’t panic
Stay calm. There’s no need to check the value of your portfolio multiple times a day. Try to remember stock markets are cyclical by nature, and when they go south, it’s all part of the natural cycle of things. If you can afford not to, then now is not the time to jump ship and sell everything.
2. Switch off the news
When you hear or see a headline declaring that the stock market is crashing, it’s easy to become worried and start questioning your long-term investment strategy. Instead, turn off your phone or TV and take a deep breath. Ignore the scaremongering. Chances are if you go looking for negative headlines such as inflation or rising interest rates you will find it. Media attention often has the unfortunate affect of fuelling fear and greed within investors, leading to hype within the share market which can lead to short term volatility.
If you have conviction in your investments and have made up your own mind, then during a falling share market it sometimes helps to turn off this noise and get back to living your life.
3. Stick to your long-term strategy
The best way to make money through shares is to adopt a long-term investment strategy. Of course, watching the value of your portfolio shrink can be very nerve-wracking in the short term. However, you’ll feel even worse if you sell your investment and take a loss, only to see that same investment grow in value when the market rebounds later on. Building your wealth via shares takes time and patience, and investing is a marathon, not a sprint! Checkout our article on the Basics of Investing for a refresher on this.
4. Use Dollar Cost Averaging
What is dollar cost averaging? It entails investing a set sum of money at regular intervals over the long term. You invest whether market prices are high or low. Dollar cost averaging is a disciplined, non-emotional approach to investing in the stock market. It allows you to fight the urge to sell everything in a blind panic. Additionally, dollar cost averaging helps you to take a step back and look at the bigger picture. It removes the temptation to try to time the markets or engage in other risky behaviour. You can stick to your long-term investment plan more easily and eventually come out on top.
To wrap up
If you have access to a crystal ball, by all means, use it for making investment decisions. Otherwise, adopt the above advice to ride out the current downturn. Investing, after all, is a long-term game. To learn more about dollar cost averaging and other successful long-term investment strategies, contact us today.
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