3 ways to fall asleep easily in the downturn | Smart Change: Personal Finance
Few things are as worrying for investors as a market crash or correction. It’s only when you’re enjoying a period of generally soaring values of your investments that the value of your portfolio has suddenly shrunk. It’s enough to make many of us lose sleep.
Here, then, are three things to keep in mind that might help you sleep easier during a market downturn. (They can be especially powerful when paired with some warm milk or a vacation from your smartphone!)
1. Remember: the markets will always be volatile
The first thing to understand is that market downturns are also Normal. They occur every few years. Everyone’s past is followed by a recovery too – with recoveries often occurring within a few months, although some may take a few years. Even better, the markets hit new highs after the market crash as well.
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Take a look at a graph of stock market performance over many years – probably measured by Standard & Poor’s 500 or Dow Jones Industrial Average index. It might look like an upward slashing line, but if you zoom in, you’ll see that the line is squiggly, featuring many small and large drops and recoveries.
2. Remember: Recessions bring stock deals
This fact about stock market crashes and corrections is actually exciting: They slap hard “cuts!” Signs of several stocks you’d like to own – or on stocks you already own and would like to buy more.
Consider a semiconductor specialist nvidia, It is a long market dear. Its shares have recently fallen nearly 52% from their 52-week highs. So, if you drool in stock at its highest, you’ll get a huge discount on it. Interested in the troubled hospitality industry Airbnb? It was recently 47% higher than its 52-week high. apple decreased by 25% and Amazon.com It was 43%.
Not all deep discounts are automatically deals. You should still research any company of interest to assess its financial health and growth prospects – and then ensure that it is reasonably valued or undervalued.
3. Remember: Your losses are likely to be paper
Finally, it may help you sleep easier if your portfolio has fallen sharply in value but you haven’t actually sold any shares – because in such a case, you only have what is referred to as a “paper loss”. In other words, you still have a chance of seeing those losses disappear. You still own the stock, and it is assumed that the underlying companies will continue to grow in value over time.
The two stock prices that are most important to investors are the price you bought the stock and the price you sold it. These two prices determine whether you made a profit or a loss. The stock price when it temporarily sank three months ago or five years ago shouldn’t matter much.
So take a deep breath. It’s very reasonable to go into a market crash or downturn, but experienced investors know that it’s usually best to stay there – and if possible, go shopping to buy more shares.
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