The idea of losing all of your hard earned money in the stock or crypto market is never pleasant. Many people begin to obsess over this fear if they notice the stock or crypto market begin to fall for several days straight. It often leads to impulsive decisions that have bad outcomes. However, stock market investments should be viewed as long-term investments. There will undoubtedly be ups and downs along the way. It's never a good idea to completely overhaul your strategy because of a few days of underperforming. Here are some important concepts to keep in mind.
1. You Are More Than Just Stocks
It's highly likely that your portfolio is far more diverse than a simple collection of stocks. Therefore, when stocks do take a dive you still have bonds, cash, and other assets to consider. You can even consider the equity in your home and earnings you will make in the future. The likelihood of the value of all of these things falling at the same time as the stock market is nonexistent. Take comfort in these extra assets as you wait for the stock market to turn into a bear market once again.
2. Don't Forget Your Previous Success
It's easy to get caught up in the doom and gloom of a falling stock market. You should strive to remember the previous success you've had and will likely have again in the future. If you were involved in stocks since the 1980's, during the 1990's, or between 2009 and 2015, then you are probably what most people consider a “winner”. When the condition of the market is worrying you take a look at the long-term performance on your statements.
Converting your stock value to cash is a great way to lose out on more long-term performance. You'll spend time waiting for a sign that you should get back into the market. Unfortunately, that sign is usually big gains that you will miss.
3. Remember Your Goals
You likely sat down long ago and made a concrete plan for future investments. You considered the risks associated with stocks, but also understood that they traditionally experience high returns. You created a portfolio with an acceptable level of risk and set goals for your future. Your goals shouldn't go out the window as soon as you notice a drop in the market.
Capitalism remains the same as it always has. Your confidence in the stock market should stay the same as well.
4. There Is Always Time To Recover
A lot of elderly investors sold out their stocks in 2009. Many of them are still alive today and have a good twenty years ahead of them. If they had held firm they would have experienced a recovery period. Then they would have more money today to enjoy vacations or pay for long-term care.
The market has always had its down days, but it always rises again during a recovery period. If you have the patience to wait, relax, and let the market do what it does, then you can enjoy that recovery period as well.
5. The Stock Market Can Be Very Stressful
In fact, the market is too stressful for a lot of people. There is a possibility that you are one of those people. However, you should take your time and really give it a chance. Don't rush into decisions based on a few bad days. No other market has the security or potential that the stock market has. You will need to find your own balance of risk and reward that causes as little stress as possible. It may take some experimentation, but once you find your comfort zone you realize that the stock market is a great way to secure funds for the future.
6. This Is How The Market Works
There's nothing crazy about the market taking a dive for a few days. If you've been in the market for any period of time, then you've probably seen it happen many times. It would take considerable economic turmoil for the stock market to lose its worth. It's a safe and reliable way to save money, but it requires patience and a cool head.