Many of us like roller coaster rides for the thrill and excitement they bring. However, we don’t enjoy roller coaster rides when we are talking about the stock market. Maybe it is because when riding a roller coaster, you have the anticipation while waiting in line, the excitement during the ride, and then it’s over.
With investing, there is no anticipation for when the market will swing huge amounts in either direction. We don’t know when the ride will end, and during all of this, we have the media hitting us from every angle reminding us how bad it is, how much worse it might get, or vice versa.
Because of this, many of us react emotionally with our money and invest the wrong way. In order to reach your financial goals, you need stop yourself from giving in to your emotions and stay invested for the long term.
But how do you do this? Here are 8 tips to help you survive a volatile stock market. By following these tips, you can increase your odds of making money in the stock market and not getting emotional when volatility hits, costing you money.
8 Ways To Survive A Volatile Stock Market
#1. Have A Game Plan
The very first step to survive a volatile stock market is to have a game plan. By having a game plan, you will be better prepared to experience success. No successful coach goes into a game without a plan. No successful company enters a new business or develops a new product without a plan. Take the time to prepare your plan.
How much will you invest? Are you investing everything at once or slowly investing over time? How will you diversify your holdings? What is your time horizon? What are you using this money for? The better prepared you are, the greater your chances for success.
#2. Know What You Own And Why
If you know what you have in your portfolio and the reasons why, it will make it easier for you to deal with a down market. If you own bonds in your portfolio and they aren’t performing, knowing that they are in your portfolio to diversify risk away from your stock investments will give you reason to continue to invest in them.
When a stock I own has a large pullback, I stop myself and ask what has changed with this company. If there are rumors of potential bankruptcy, I consider cutting my losses. But if nothing changed with the company specifically and the market is dropping as a whole, I keep my position in the stock knowing that it is still a good investment.
If you are like most investors, you have various accounts with various brokers. This makes seeing what you own tough. An easy solution to this is Personal Capital. When you join for free, you can see all your investments in one place and make decisions much easier.
They also help you to see how much you pay for your investments and plan for retirement. I encourage you to check them out.
#3. Nothing Is Permanent
All the good times eventually stop and all of the bad times end too. The stock market is cyclical in nature. That means it rises for a bit, then falls, then rises, etc. Knowing that no matter how bad things get, it is not permanent is key in achieving long-term success.
Look back at 2008 and how far we have come. The economy as a whole may not be great, but the stock market has come all the way back and more.