It’s pretty difficult to avoid the panic that coronavirus has created worldwide. Not just the pandemic but another chaos is the oil price wars, and this has resulted in the US markets getting plunged and have dragged down the value of millions of investors’ portfolios in a matter of few days.
With this chaos going on, the best way to secure your money is to take a breather and continue to follow the long-term plans.
In the meantime, here are 4 things you shouldn’t do when the market tanks
1. Stop Saving Money:
With the condition that the economy and stock market are in, it is ideal for saving money. Do not stop saving money! If you have an upcoming goal, keep saving for it. You must build an emergency fund that you can use later in case of any financial emergency. If the market continues to tank and towards recession, a cash reserve is the best way to secure yourself from an overload of debt.
2. Spend Beyond Your Allowance:
The foundation for successfully building wealth is to avoid excessive spending, especially in times like these when borrowing rates are falling. Your savings may look quite inviting but do not get tempted and avoid shelling out for expenses that may seem cheap right now. If you think you cannot repay the mortgage of a new house, do not invest in one. If repaying credit card bills seems challenging, avoid spending money unless there is a need.
3. Shelve the Contribution to your 401(k)
It may seem quite preposterous to jump into a free-falling market, but at the same time, this is the perfect opportunity to invest, especially for people who are young and fresh. If you’re not contributing to a retirement plan, here’s your chance, start today!
Currently, stocks in the market are on sale en masse so that you can buy more stocks for a lesser amount. Eventually, when the market climbs up and goes back to the way it was, you’ll see that your investment value will ultimately rise. At this time, ideal investments are ETF’s and Index funds; choose them over individual stocks.
4. Clearing Investments:
At this point, it’s ideal to sit tight with the investments you have and do not burn cash.
It may seem ideal to let go of stocks that are falling, but it’s not as easy as it looks. The stock market is not predictable, and selling off a stock can backfire pretty bad. So it’s better to opt for the buy and hold investment strategy right now, which is wholly designed for wide swings in the market. It’s proven that trading activity in a bull market doesn’t produce good returns too. So avoid selling off your stocks and sit tight; better days aren’t far!
Ideally, these ways should be avoided, and instead, focusing on doing the opposite is what you should be doing—planning to sell your stocks? Stop! Are you planning to pay for your expenses from your savings? That’s a no-no. Play safe, and in no time, the market tank will stop, and you’ll see yourself moving towards betterment!