The stock market is in a tailspin, and there’s no end in sight. So if you’re thinking of selling all your stocks, think again. Here are a few tips on weathering the storm and coming ahead when the dust finally settles.
In recent months, the stock market has taken a nosedive not seen since the Great Depression. As the plunge continues, many wonder what to do with their stocks. Should I sell? Hold on? Buy more?
The answer, as with most things in life, is it depends. It depends on your goals, your timeframe, and your risk tolerance. However, some general principles can help guide you through these turbulent times.
Have a plan
The first step is to have a plan. Yes, it may seem obvious, but you’d be surprised how many people don’t have a concrete investment plan. What are your investment goals? Are you saving for retirement? A child’s education? A rainy day fund? Once you know your goals, you can start to develop a strategy for how to achieve them best.
Know your timeline
Next, you need to know your timeline. Are you investing for the long term or the short term? Your time horizon will dictate what types of investments are suitable for you. For example, if you’re investing for retirement, you can afford to take on more risk because you have time to ride out the ups and downs of the market. On the flip side, if you need the money in the next year or two, you’ll want to be more conservative with your investments. You don’t want to lose everything if the market takes another dip.
Know your risk tolerance
Finally, you need to know your risk tolerance; this is probably the most crucial factor in deciding what to do with your stocks during a market crash. Some people are natural risk-takers and are comfortable with their portfolio taking some hits to earn higher returns down the road potentially. Others are more risk-averse and prefer to preserve their capital, even if it means making lower returns. But, again, there’s no right or wrong answer here; it’s simply a matter of preference. Plenty of online quizzes can help give you a better idea of your risk profile if you’re unsure where you fall on the spectrum.
No one knows what will happen in the stock market from one day to the next, let alone for several weeks or months. However, by having a plan, knowing your timeline, and understanding your risk tolerance, you can make intelligent decisions about what to do with your stocks during periods of turbulence. Soak up as much information as you can from trusted sources (like CNBC or Motley Fool), and then make decisions based on what’s best for YOU and YOUR goals. Finally, stay calm and remember that this, too, shall pass!