The stock market could very well crash in the coming months. This might sound like bad news if you have a lot of your hard-earned money invested. But a market crash isn't something to fear. In fact, there are three big reasons you shouldn't be concerned as long as you've got investments you believe in.
1. Inevitable
Worrying about a stock market crash is like worrying about a rainstorm. It's not worth it because a crash is as inevitable as a rainy day. Crashes have always been part of the natural economic cycle and if you are prepared, you can easily weather the storm.
Have an umbrella. In this case, your umbrella is a portfolio strong enough to make it through unscathed.
2. Recoveries Follow Crashes
A market crash can send your investments plummeting, but just as there have always been crashes, recoveries have always inevitably followed like a rainbow after a storm.
The recovery may take months, or even years. But over time, the market has consistently gone up and never experienced a downturn that didn't eventually reverse itself.
If you have investments you believe in, just hold them through the crash and wait for the price of your shares to bounce back. Any losses will be temporary and only on paper, and you should end up earning positive returns over the long haul if you've invested wisely.
3. Buying Opportunities
Rather than worrying about market crash, you should view it as an opportunity. Contrary to what your instincts may tell you, it's a good idea to invest more when a crash has occurred. You can buy shares of good companies when they are on sale and benefit from the discount.
If you want to make it through a crash unscathed, there are a few key things you need to do.
Source: https://www.business2community.com
First, don't invest in anything that you wouldn't be prepared to hold through a downturn. If you're trying to make a quick buck with a short-term investment and you don't trust that the company can survive tough economic times, you could suffer permanent losses if you have bad timing and buy before a crash occurs.
Second, aim to have some cash available to invest when a crash happens so you have the opportunity to take advantage of discounts in companies you believe in.
And third, never panic-sell because doing so just locks in losses. Avoid checking your portfolio obsessively when times are tough and have enough confidence in your investment thesis to sit back and wait for the turnaround to come and your investments to rebound.
If you do these things, a market crash shouldn't be cause for any concern.
Reference:
3 reasons not to worry about a stock market crash, Christy Bieber, www.fool.com,
May 2, 2022
No comments:
Post a Comment