If you’ve looked at your portfolio regularly in the last several weeks, you’ve likely gasped while trying to wrap your brain around how equities can fall so fast.
Well, it’s simple: Investors are panicked over the global threat of the novel coronavirus. With no end to the spread in the immediate future, Wall Street is selling off, forcing stock prices down in a big way.
So much so that all three major U.S. indexes dropped more than 20% in a matter of weeks, pushing them all into bear market territory.
While investing looks pretty scary right now with volatility high and prices falling, there are some things you can do to keep your investments safe as markets panic over coronavirus.
Keep Your Investments Safe as Markets Panic Over Coronavirus
1. Don’t You Panic
This is perhaps the best advice you can follow.
Usually, the first reaction when markets start to go south is to panic. That’s one of the main reasons we are in a bear market. Investors panicked, sold off and prices plummeted.
But if you are already invested in the stock market, selling everything off is perhaps the worst thing you can do.
Consider the reason you started investing in the first place. You were looking to safeguard your retirement, use your savings efficiently or even grow your wealth.
If you are playing the market, selling off in a hurry doesn’t fulfill any of those reasons.
The important mindset here is understanding you are in the market for the long haul. Stock downturns are temporary, so thinking long-term you’ll realize things will recover. You just have to be patient. As some say: It’s not timing the market — which is next to impossible — it’s time in the market that pays off most over the long haul.
Holding on to that belief is one way to keep your investments safe as markets panic over coronavirus.
2. Prepare for Losses
When markets drop, your investments lose money. That’s simple math.
So, when there is panic and indexes crater, you have to understand that your portfolio value will go down. But, as we said earlier, this is only temporary.
Plus, there are ways to help mitigate those losses.
While those are all palatable ways to mitigate losses, they likely won’t erase them completely.
That’s why you have to be prepared to see losses in your portfolio. If you aren’t, you are more likely to panic — and we’ve already told you not do to that.
Understanding there will be valleys along with the peaks everyone loves so much is one way to keep your investments safe as markets panic over coronavirus.
3. Understand the Risk Tolerance
You never want to invest more money than you are willing to lose.
So before you sink your kid’s college fund into the stock market buying the dip, you need to know how the movement of equities can impact your portfolio. Doing that will help you identify your tolerance for risk.
One way to do that is to use stock market simulators.
They give you up to $100,000 in virtual money and allow you to invest as you see fit. You can invest in whatever you want.
What that does is allow you to see what would happen with your real money if you were to follow the same guidelines. You can see where and how much your losses would be.
It can help you with a particular trading strategy as well as give you a foundation for how much risk you are willing to take when the markets are down.
Understanding your risk tolerance is another way to keep your investments safe as markets panic over coronavirus.
So, the key takeaways here are:
- Do not to panic.
- Prepare for losses and know what you are willing to risk when you invest.
- Be patient and do your homework.
These tips are the best way to keep your investments safe as markets panic over coronavirus.