Markets Crashing

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(Please note that this article is not professional investment advice.

It is an attempt to educate the investor about common finance matters.

If the investor chooses to make an investment decision after reading this article, he does so based on his own judgement.)

Financial markets experience ups and downs so frequently that there is a term for these movements.

A rising stock market is called a bull market and a falling stock market is called a bear market. 

In this article, you can find out what to do with your investments, in a falling market, with these 5 tips. 

1. Keep calm and don’t sell

In times of financial crisis, investors drop their holdings due to fleeting moments of panic and regret it later when the price of their previously owned stocks go up.

This is because in every market, there are ups and downs. 

When you keep your stock through these movements, you’ll find on average an upward movement in your stock.

What matters is holding on to your stocks and bonds and keeping it for longer time horizons so they can mature.

If you drop your investments during temporary fluctuations, you cannot recoup your losses and will have to reinvest to see the same gains.

Make sure to research your assets before you invest, so you can safely buy investments that have a good track record. 

 2. Dollar-cost averaging

Dollar cost averaging is a method that can allow investors to buy stocks for cheaper.

This means in a falling market, investors should actually buy stocks and not sell. 

The rationale behind this is if an investor buys stocks through all market scenarios, in regular intervals, he will end up buying assets at lower prices than he would if he bought them in a bull market, where prices keep increasing. 

This is because over the long term, his prices are now averaged out through buying at highs and lows. 


3. Keep a financial advisor

The stock market rewards investors who are able to implement better, time tested strategies.

If you’re an amateur investor, enlisting the help of a veteran advisor can help keep your holdings intact for far longer.

In situations where you may be pressured to sell, you can count on your financial advisor to manage your assets for you and hold them through dips and rises. 

Ensure your advisor works at a reputable financial services company and you’re all set to start investing.

 4. Diversify your offerings

A well-balanced portfolio will hold up through hard and easy times in the market.

Make sure to diversify your assets across stocks, bonds, alternative assets e.t.c.

Putting assets that move in opposite directions in bull and bear markets can help protect the overall value of your portfolio.

Investing can seem daunting, but keep a rational mind

Big movements in the stock market often happen due to moments of mass panic, created by the media.

The investors that win are those that are able to rationalize the information they receive and then decide accordingly whether they should buy or sell. 

Before you start investing, it’s important to figure out what your tolerance for risk is.

This will help you invest in stocks that are suitable only for you.

Your risk profile will change as you age.

Young investors may find they have a higher appetite for risk.

Older investors will find themselves more interested in preserving their wealth and therefore, investing in lower risk-profile assets.