It’s a given that investment in the stock market will come with challenges and ups and downs. Nevertheless, as an entrepreneur, you shouldn’t allow market uncertainty to cause you needless panic.
Even the most seasoned investors sometimes experience panic when they are investing in the stock market. So, how can you be resilient and maintain perspective? Consider five strategies to help you gain the needed perspective.
Keep Calm
One of the biggest mistakes most investors make when the stock market gets bumpy is to go on a frenzy of impulse buying and selling. However, doing so will cause more harm than good. For starters, it can lead to financial loss due to the unpredictable nature of the market. After all, volatile markets with rapid swings require discipline rather than spur-of-the-moment emotional reactions. The best course of action is to wait until the market stabilizes.
Create a Personalized Investment Strategy
A well-planned investment strategy can help you get ready for the ups and downs of the stock market. Begin by creating a plan in which your goals, risk situation, and time horizons are well-defined and documented. Then, create a personalized strategy to execute your goals based on your specific situation.
Stay Invested
It is the best course of action to remain invested in the stock market despite its fluctuations. When the stock market fluctuates, many investors may be tempted to move their investments or cash for better conditions. Nevertheless, that doesn’t always lead to a better outcome. Based on what many would tell you, timing the market is impossible to do consistently and usually results in missed opportunities that require you to either sell or reinvest.
Don’t Avoid Risk
While market volatility is unavoidable, you can certainly manage it. One of the best ways to do so is by selecting an appropriate asset allocation that aligns with your goals and risk tolerance. This is definitely one of the most impactful decisions you can ever make. It is also important to find or establish a middle ground while investing, one that offers a balanced approach to risk and return. If you do so, you can ultimately stay the course through the market’s ups and downs and improve your chances of achieving your long-term financial goals.
Maintain an Adequate Cash Reserve
When the stock market experiences a sudden change, it takes a general toll on the market, and prices may all of a sudden become more expensive. Having a cash reserve on hand or saving money can help you cover unexpected events or emergencies. Generally speaking, the amount in your cash reserve depends on your specific situation. Nevertheless, maintaining three to six months of savings in a liquid account can help you feel more secure and equip you to weather a volatile market without having to sell assets when the market is down.
Embrace Diversification
A famous adage once said, “Don’t put all your eggs in one basket,” as a testament to this fact, it is imperative to diversify your investment types. This will help you mitigate the effects of a volatile market and, at the same time, lead to stable returns over time. When you include different investment assets that are less correlated to one another, gains in some can offset losses in others. When the stock market fluctuates, you won’t feel its impact as hard as others.
Contribute Regularly
When the stock market fluctuates, it can be hard to determine when to invest. Nevertheless, many financial institutions have channels and tools that allow you to contribute at regularly scheduled intervals. By contributing on a regular basis, you can take advantage of market dips and purchase more mutual fund units when your dollar goes further, which in turn allows you to lower your average cost and accumulate more money.
Once markets experience volatility, they tend to stay like that for a while. Nevertheless, that shouldn’t be a deterrent; after all, volatility isn’t a bad thing when you have a plan. By following the strategies above, you can weather a turbulent market successfully!
David Messiha | Staff Writer
