The world is very scared right now. With sweeping travel restrictions going on through Europe and around the world everyone is getting worried. This is the same with the rest of the stock market. We have seen significant falls in many areas of the market. While there are some islands of growth its not looking great for most areas of the market.
So, what should we do? Sit back and watch?
Well for those of you with a smart automatic investing machine you would have had stop losses placed that would have pulled you out of the market when it started to fall a while ago. Good dog you get a treat and now you just wait for the market to recover. For the others that are still in the market there are 2 things you can do.
Option 1: Hold on
So, the first option may be the scariest one but it makes sense. As with every depression the market will recover in time. The world will not end, and we will go on making things, consuming products and we will look back at the start of 2020 as a point where we learned some valuable lessons.
There are a couple of things to consider here.
Firstly, that you only really have a loss when you sell. That means that like with all trading you made or lost money until you sell. You only have an indication of what your stock, crypto or other asset is worth, by looking at what it is selling for on the market. Selling is where you ‘realise’ the gain or loss and close out your trade.
A loss only becomes a loss when you sell.
Second, for the betterment of the market you should keep your money in play even if it drops in scary ways. The more people that don’t sell, the more the market is supported and stops it from falling further. Remember this is all temporary and the market will recover along with your profitability.
Option 2: Sell out
Now as you may have already realised. The best option really is to sell out. Every investing book and guru would tell you to cut your losses and get out. Join back in when there is a better market for you to invest in. That’s why the investors with stop losses that are already out of the market got a treat.
But only way this option works is if you sell out NOW and buy back in at a lower point in the market. If you are going to sell, then sell damn it! Waiting for a little rise or some change in the down trend is a beginner’s game and will cause you to lose money.
This is probably the smartest option, save as much money now as you can and when the market begins to recover then jump back in.
If you are going to get out of the market, THEN DO IT NOW!
There is a message and an opportunity in all of this
With any of the options there is always an opportunity in a downward market. Looks for short selling opportunities, although this can be hard in the crypto world. Also preparing yourself to buy back in when the market starts to come back up again is a good strategy. Don’t try to pick the bottom but wait for the trend to turn around and the bulls start to push the market back up again.
Some of the biggest gains can be made coming out of a recession or depression and some of the biggest companies in the world were born in the depths of a depression. Riding the wave of growth out of a depression is a sure-fire way to success. Being prepared and getting ahead of the market on the way back up is a very good strategy for beating your competitors that will still be licking their wounds.