Efficient Ways of Surviving Market Downturns

As an investor, your goal should not only to survive the downturn, but also find the amazing opportunities that could be lurking in the negative situation.

The lifecycle of any business or any economy is characterized by periods of ups and downs. Market downturns, are also known as bear markets in the global world of finance and this refers to periods when normal asset prices decline. Needless to say, they are unfavorable and unpleasant periods for investors.

As an investor, your goal should not only to survive the downturn, but also find the amazing opportunities that could be lurking in the negative situation. Bear in mind that every negative situation has an opportunity lurking. Here are some ways to mitigate this risk.

Never Invest What You Cannot Afford to Lose

Every investor hopes for profits and high yields of their investments, however losses remain an unavoidable part of investment. To avoid irrecoverable shocks from investments, ensure that you only invest what you can afford to lose – at least for your high-risk investment options.

Get Rid of your Fears

Fear is one concept that does not go so well with the game of investing. Approach investment options with a mind free from emotions, such as fear, worries, or panic as they could be the very things that cause you to make biased and illogical decisions in the market.

Investment already is a risky enough business; the last thing you need is to throw fickle emotions into the mix. That said, over confidence too is a challenge.

As opposed to thinking you can never be wrong, carry out the relevant assessment or analysis required and make investment decisions strategically and realistically.

Calculate all you have to lose as well as all you have to gain and remember that what seems like the end of the world today might not even matter tomorrow.

Naira-Cost Averaging

Naira-Cost Averaging refers to an investment strategy where the investor breaks down the total amount to be invested across an asset's private purchase. This helps investors stick to their plan and prevents them from swaying with the tide.

Through Cost Averaging, you can buy shares when the market is down at a low price, which will spread out your cost on the security and ultimately give you a good base case to grow from.

Avoid Sudden Moves

Impulse is another thing that could curtail your success as an investor. Market Downturns typically come as shocks, and it is only natural that you are tempted to take a sudden decision.

However, it is highly advisable that you resist that urge. Sometimes, it might even be better for you and your investment to play dead. Just wait and see.

Diversify your Investments

At Yochaa, we are very big on diversification. Never put all your eggs in one basket. Divide your portfolio among bonds, stocks, cash and alternative assets as it would help you reduce risk and maximize your gains.

Diversification is a recommended approach because it is a well-known risk management strategy. By employing an appropriate strategy for asset allocation, you’re able to avoid the dangers involved in putting all your investments in one source.

With this, market downturns just might reveal new gains for you and lead to the growth of your overall investment portfolio.

Written by Lawretta Egba.