Keep hold of Stocks
When the market takes a downturn, many begin to panic and liquidate their portfolio or take short positions. Do not be quick to take this approach, often the best thing to do is to not do anything and wait out the market until it becomes stable and a clear picture of the value of stocks can be seen. This was you will be in a position to benefit from any forward motion on the market.
Refine your portfolio
It is possible to refine and reduce your stock exposure whilst maintaining the core strengths of the portfolio. One step is to sell assets that have not been doing well, if you hold onto them whilst they continue to perform badly, they can be targeted in a correction or protracted downturn. Do not hesitate to take profits, if investments have performed well and you no longer have confidence in them, take the profits, even if the market increases you will have peace of mind that you locked in a profit.
Don’t always follow the trend
People follow trends this is evident when markets see a surge in index investing with people throwing in money for index-based ETF’s and then following the market up. While this type of investment can work the most profitable types of investments tend to be isolated incidents. To find these isolated incidents it is better to not follow the crowd but focus on the following factors:
- Companies with strong growth
- Dividends matter – if markets reverse invest in stocks from strong companies
- Keep an eye out for the underdog –Stocks that have not performed well but have solid companies behind them, it’s possible the stock can improve.
Cash has two main advantages, the first is that it reduces the unsteadiness of your portfolio. This is due to the fact that cash investments have no risk of principle and is assured to hold value during times of volatility. Another advantage is that having a large amount of cash allows you to be prepared to benefit from new investment situations to move forward. A way to increase your cash is to keep any new contributions liquid, do not be quick to place cash straight back into stocks.
Whether the market is performing well or bad it is always best to be prepared for any unpredicted turns in the market. If you follow the above suggestions, you will enjoy the highs of the market and endure the lows.