We all are so used to the standard definitions of stock market going up and down, but the current pandemic that we are witnessing right now is something which the world has never seen before. Over the first quarter of the year 2020, the market volatility has been at an all-time high due to the novel coronavirus outbreak, which is leading to widespread uncertainty in the global economy as a whole.
Therefore, it’s important to deal with the ups and downs so that we all can refrain from making emotional decisions which are so crucial to being a successful investor.
When the downturn hits, our resolve must hit harder. Here are few important tips for you to evaluate and apply in your investment strategy.
#1 Stay on course; don’t fear
Successful investors believe that volatility is part of the process. Instead of fearing volatility, they have learned the art of patience and planning. If there’s anything the day-by-day machinations of the market teach us, it’s that slow and steady wins the race. Investors have long known that staying on the original plan is one of the most important things to do — it’s just emotionally tough to execute.
#2 Avoid sudden movements
Panic leads to taking sometimes abrupt and wrong decisions. Investing is a process over time and one should not get caught up in the short-term market fluctuations. The short-term fluctuations in market, which may seem so big to investors, have hardly anything to do with the long-term wealth accumulation.
#3 Always diversify your portfolio to manage risks
It is proven fact that diversification is an important way to manage the risks of your investments. By classifying your investments among different companies, http://armodexperiment.com/ sectors and asset classes (such as bonds and mutual funds), you can effectively reduce the impact of downturns in a particular market on your overall portfolio. In case your portfolio is not spread enough, this is the time to review and have a diversification strategy in place.
#4 Do not follow the herd
We cannot repeat enough that never copy the actions of others around you. At this point strictly avoid rumours and hot tips. You need to study and do your own analysis or leave the job to your investment advisor who perhaps is better equipped to deal with the situation.
#5 Avoid emotions to cloud your judgement
In current market volatility Fear of Losing Everything (FOLE) is natural to happen. When market volatility causes large swings in the stock market, people can become unnerved, causing them to ignore their trading strategy. This behaviour was most notable in the wake of the 2008 financial crisis. Investors pulled their money out of the stock market as a reaction to the market sell-off, only to subsequently miss out on the dramatic recovery.
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