Investing in a turbulent market can be stressful without the right investing knowledge and tools. The 2020 stock market crash has ended, and 2021 is expected to be a strong market. This is an example of volatility and is expected in markets, with periodic dips being a perfectly normal occurrence. Many investors, however, are unsure how to make these dips in the market work for them.
Read on below to discover why it can be a good idea to invest when market prices are down and how SmartWealth can help you invest wisely, whether the market feels safe or volatile.
A drop in market prices, particularly as the entire market is struggling, can lead investors to feel like it is time to cut their losses and withdraw themselves from the market. However, it could be beneficial to turn to more stable investment alternatives, instead. The feeling of getting out before it the market drops lower can be natural, but it is not usually the best advice.
Instead of dropping your investments and selling everything when markets dip, you can use one of these strategies to reach your long-term goals without interrupting your investment experience.
If you are concerned about the long-term trajectory of a particular asset or stock, then consider diversifying your portfolio. Reducing risk through diversification is a popular strategy which allows you to continue investing during a dip, without putting all your trust in a single asset or market’s performance.
Working with a robo-advisor as part of your investment strategy, for example, can help you focus on the long-term plan of your investments. These can assist you in managing and building on your investments, while providing you with diversified investment options so you can avoid having to constantly buy & sell.
Also known as “buying the dip”, investing more when prices are down is a common strategy to grow your long-term wealth. While your investment may not be doing well in this particular moment, it is important to continue to invest and avoid the costly mistake of selling when prices are low.
Buying when markets are down allows you to buy more of an asset, e.g. more shares of a stock, at a lower price, which could result in more returns when the market improves again.
A stronger strategy is to consistently invest a fixed amount on a regular basis, regardless of market prices/performance (also known as Dollar Cost Averaging or a Systematic Investment Plan). This removes an investor’s need to “time the market” and helps take the emotions out of investing.
Stock prices have a historical upward trend. It may not seem like it in the depths of a crash, like throughout much of 2020, but it’s been true of the market for over 100 years.
Use patience as part of your investment strategy to wait out a dip. If you’re investing for retirement or long-term wealth building, then your investment will likely outlast the low point and will may enjoy an overall upward trend.
It’s impossible to predict every move in investing. A volatile market, however, can still be an opportunity to grow your wealth. Diversifying your portfolio, buying the dip and investing patiently can all help you outlast any irrational swing and handle any risk.
Remember that for many investments, a dip is only a temporary setback. Continue to invest in a diverse way as long as you can ride out any temporary dip in stock prices.
Smart investing doesn’t have to be complicated. SmartWealth by NBK Capital is a convenient online investment services platform that can help you reduce the impact of volatility and invest wisely. Get started today to learn more about current market trends and how to invest based on your goals during a volatile market.