After a major drop in the stock market last week, the volatility continues to remain in Wall Street. The dropping prices of oil and the rising number of coronavirus cases are further adding to the woes of the investors and traders alike. Those who had been invested in the stock market and have enjoyed the constant market rallies in the past few years are totally spooked now after witnessing such a steep fall. However, the point to note here is that markets will always have ups and downs and hence this can be a great opportunity to check your investment strategy.
Last week, DOW posted its word drop since the 1987 black Monday and on Wednesday it stepped into the bear territory after WHO regarded coronavirus as a pandemic. The slip marked the end of an 11 – year long bull market for wall street. No previous health emergencies had such a drastic impact on the market like coronavirus. The longest impact a pandemic had on the market was in 1981 due to the HIV/AIDS pandemic. It lasted for 5.1 months back then.
Here’s what you can do for your money!
- Long term investment – Before you start investing, make sure that you have at least 6 months of salary stacked up for the tough times. It is because any money you put in the market now should be with the intention off keeping it in there for a long period. Short term gains aren’t possible given the state of the market right now.
- Dollar-cost averaging – Keep your investment amount foxed for a particular stock for a long time. This will ensure that you will end up buying more shares when the market is low and fewer shares when the price is high. It offers your portfolio more stability and price averaging which will benefit the long-term investors.
- Diversify more – Choose passively-managed funds or low-cost funds that will offer you a wide range of stocks. Also, invest not only in the local market but also in foreign funds. This is more important because if the value of your currency takes a drop, the foreign stocks take a leap and you end up gaining profits!
Investors who are young and just about to begin or have begun recently, this fall in the market is the best thing that could have happened. History has it that people who have invested in such a bear market or market correction phase have earned more than those who have sold off their stocks in such time. The market is in stress but individuals need to relax and keep investing so that they can buy more units into their funds and later capitalize on it when the market grows.