Tips For Investing In A Down Market

The stock market is in a constant flux with losses and gains happening by the minute. Where you find yourself in a down market, there are certain tips that should guide your reaction.

The stock market can be many things, but one thing it isn’t is stable. Every day, every minute, share prices rise and fall. The market environment is constantly moving; somebody is gaining while another is losing - it is how the market works.

While it is normal to be worried in periods where your stock picks are on the losing side or even the market itself is experiencing a downturn, you need to know how best to move. Given the current Nigerian political instability from the elections, this is even more timely. Here are some tips for the investor when he finds himself in a down market.

Do Not Panic!

The truth is nobody feels good when they pick up the papers and see headlines like “The stock market loses 30 billion Naira.” However, these events are just events usually govern that day or that period - it would almost always bounce back.

Panicking is probably the worse thing that could happen to the market, and it is the number one cause of market downturns. Panic that certain stocks would crash, panic that a governmental policy would affect the market, or just the fear that things would only get worse.

The same way you don’t stop using a bank simply because there was a bank fraud that happened to somebody, you also shouldn’t stop investing because things look bleak. What you can do is take precautions.

Do not sabotage your long term gains for short term panics. Tune out negative media if possible and focus on your portfolio.

Understand How The Financial Market Works

One great thing you can do when the market seems cold, is to increase your knowledge of it. In downtimes, investors panic then begin to make rash decisions and lose perspective.

Hence, it is important to reaffirm your knowledge about the market. Read books and learn tips from the investing legends. It is important that you do not listen to self-acclaimed investment gurus.

Also avoid the wilderness that are search engines as you would get confusing information. In times like this, investment tools like Yochaa would put you right on track.

Focus On Your Portfolio

By this time, you already know that you should have a well-diversified portfolio. This would provide buffer for you where the market seems to be failing or just heavily unstable.

As such, you might soon discover that you’re not even losing as much money as you think because some stocks are actually gaining. It is also important to identify the problems with your portfolio.

Downtimes are particularly great for exposing the problems in your portfolio. For example, you would know whether you have too many investments in one industry or in a related industry. Find the problems and work towards fixing them.

Other thing to note is to remember to stick to your original investing strategy. Do not get dissuaded my mere shocks. With these few measures, you will survive every downtime and become better at the investing game.

Written by Lawretta Egba