Ways To Survive when the market goes down

Ways To Survive when the market goes down

The stock market at times can go a bit psychotic giving jolt to many investors who have tried their luck in different verticals/domains. The market while taking the downside can take all the traders to a roller coaster ride allowing people to take the dizzying plunge. The discomfort can be justified but instead of multiplying your fears at such junctures, you need to know certain ways to survive when the market is down. 

The following are some of the ways to survive during the bad market conditions, have a look at them:

Calm Down and Consider  Long-Term Thinking

Being into the domain of the stock market, you often remain on the brighter side, but at times, it can backfire and you end up losing your money. Hence you need to be prepared. You can rely on the S&P 500 index, and make it as an important yardstick for investment returns for big-time companies. The S&P 500 has lost huge money from 1985 to 2015. To be precise, they lost more in five out of 30 years, which makes the loss up to 37% on an annual basis. After the first five years, the next 25 years have gone in profit. Thus the investors with long term notions have won the game. So, instead of losing your heart, you need to calm down and think of the long term. 

Seek a Good Counsel 

The other vital thing to do while the market is down is to rely on expert advice. Consider counseling from your money manager and discuss the ways of investing your money rather than losing them with your emotional decisions. You just need to stay on the right track with proper investment goals. It is better to rely on experts.

A Stash of Income 

For getting your peace of mind back, you need to focus more on the dividends of your investment on a regular basis. Even if you see the market crashing, the dividends are not often seen dropping down as much as underlying the stock values. Consider trying the S&P 500 index once again. The index value can be seen dropping down more than 50 percent from the peak in the year 2007 to the trough in 2009, whereas looking at the dividends from the index, it seems to have dropped to a more modest 20 percent during the crash. 

Regardless of the type of employment, focussing on your income can help you a lot in dealing with your losses during the bad market. If you are retired and relying more on the dividends rather relying on the sale of stocks to fund your living expenses, you would end up facing a reduction of only 20 percent when you are held by 100 percent of your assets in the S and P 500 index.  However, if you are working, your dividends can be easily reinvested for buying more amount of shares even at lower costs during the bad market. 

Remind Yourself the True Value to find the Ways To Survive when the market goes down

Even though you see the market down, your shares are still intact. You have not lost anything. A stock dropping from 100 USD per share before the market crash can only go down to 80 USD per share after the crash. It would still represent the same amount of claim to the assets of the company along with future earnings. Your brokerage statement would only show the loss of 20 percent. Thus in the value of that position, you can still hold the money you had before the market crash. 

Consider Diversification and the Apt Asset Allocation 

 One of the best times to establish asset allocation is always before any recession. However, if you have done this before, never mind, you can still do it as it’s not too late to get your profile aptly allocated. With the help of holding the right proportion of diversified equities along with the fixed-income investments, one can find the volatility of your profile under your control. The key mantra to remember is to keep your portfolio’s volatility right under control as per the amount of risk you can digest. 

If you end up pushing your panic button by selling when the market has gone down, you end up losing your fixed investments permanently. These can include bonds, cash, and CDs. Remember, avoid the tempting options like returning only to the high equities allocation when you see the multi-year winning streak. This is nothing but to buy high and sell low exercise, something which remains contrary to what we see the modern-day investors should do.

Pro Idea: How to deal with a market slowdown condition for equity investment?

Accumulating: You may consider to accumulating the good businesses to avergate the buying price.

Sell: Analyze the complete portfolio with different aspects and sell the losers.

Sit back and stay calm : Do nothing if you trust in existing businesses and have not money to accumulate.

Note : Investments in Mutual fund schemes are subject to market risks. Please read the offer document carefully before investing.

Wrapping up 

Once you h

ave taken a plunge in the market, you should not be worrying about the bad or down nature of it. Instead, there are ways of surviving in tough market conditions. The above points can help you in surviving when the market is down. Try them! 

Investing in the stock market is risky, please learn the things properly before investing.

Next article: Why we need long term investment plan for financial freedom

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