The stock market can be scary to follow if you’re new to investing, which often makes it easy to question your own choices and worry about potential losses as the market continues to fluctuate. But fret not! The market will eventually recover, and there are plenty of things you can do now that will give you peace of mind in the meantime. Investing can be extremely profitable, but it’s not without its pitfalls. If you’re looking to increase your returns, you may have considered investing in the stock market, but market volatility makes it difficult to remain profitable during turbulent times. To avoid losing money during market downturns, keep these five tips in mind to help you stay afloat during market volatility.
Tip 1: Analyze and track your portfolio
Although trying to time a stock’s ups and downs is practically impossible, understanding your assets can help you take emotion out of investment decisions. Use a free portfolio tracker, like Google Sheets or Mint, which will automatically keep track of your portfolio balances over time. You can also set up email alerts that let you know if your stock holdings dip below certain values so you can make moves before they become losses.
Tip 2: Change Your Plan if Necessary
Things can change fast in a volatile business environment. It’s okay to be flexible and adjust your plan as circumstances dictate. If you need to make some changes, do so. The important thing is that you’re staying agile enough that you can respond quickly when things get tough. A good rule of thumb is to have a backup plan ready at all times. While it may not always be possible to execute on it, having an alternative strategy ready will help you feel more confident about how you’ll deal with whatever comes up next.
Tip 3: Increase Liquidity
One way you can improve your balance sheet is by increasing liquidity. Ask yourself what kinds of assets could be converted into cash relatively quickly. For example, if you have a rental property, are there other properties that are similar? Could you sell one and then invest some of the profits in an ultra-short bond fund? Having more cash on hand is a good way to deal with short-term difficulties and will protect you from having to make desperate decisions.
The Bottom Line
The stock market can be a volatile place, with movements of 3% to 5% in either direction not uncommon during turbulent times. For investors, it’s important to not panic during these types of periods, but instead to stay calm and take action to weather the storm and keep your portfolio on track. The above-given tips can help you stay afloat during market volatility and get you back on track quickly once things settle down again.
