Recent market volatility has many investors wondering if now is a good time to alter their investments. Though you may feel tempted to modify your investments when the market dips, it might be better to leave your portfolio as it is.
It is important to not get ahead of yourself and not change the value of your account in the midst of a downturn in the stock market. You would be best served to wait for an upswing. There are many investors who will not change the value of their accounts during a downturn in the stock market. Though there have been instances when investors decided to sell a stock only to find out that the stock was overvalued due to high dividends that they had paid.
The reason for this is the “buy & hold” strategy that many investors have followed over the years. With time, this strategy has paid off for many people. The best approach here is to wait, and do your due diligence before committing to a stock. Wait for the right circumstances. Make sure you have the correct amount of money, not too much or too little, and understand the company, what the company expects to happen, the nature of its earnings, and a host of other questions. Then, make a decision or two. The most important factor is to wait until the time is right. Never put all your money in an investment during the market downturns. One of the reasons for this is that a falling market may pull the price of an investment below its intrinsic value, causing a financial loss.
Don’t rush into a stock when there are other options you have. While it is important to evaluate whether a stock is worth entering or leaving the market, make sure your decision isn’t driven by emotion. After all, emotions do play a role in investments. But the emotional factor doesn’t mean that a stock or portfolio becomes a good investment over night. It takes time and it depends on many factors. If you are feeling the urge to trade, it is best to wait until you have put a lot of thought into the decision and have decided what the best decision is. So, the most important thing for you to do is to wait, make sure to review with a financial advisor if you need to make changes to your current portfolio in the near future, and do your due diligence.
Many investors lose money on stocks that they should have been able to make. It is important to be aware of the risks that you are taking and understand the difference between risk and reward.
Many investors are able to identify a stock that they believe has a high probability of success or failure, but have a difficult time identifying the company that will make money, even when the stocks appear to be doing great. There is a huge difference between making money during a good year and being able to make money without risk if you are able to identify which company will make money. The company that will make money usually has more risk than most stocks and thus, has a better reward to risk ratio.
