Psychology of Wealce: You can stay calm when grades go down
The stock market is a good wealth builder in the long run, as long as you can withstand the volatility during the downturn.
Market dips are normal, but how investors react to those dips can make or break their portfolios. The best investors stay calm when the markets are choppy, and these financial habits can help you stay on course.
Have a cash buffer
Before you invest, it’s important to have an emergency fund that can cover three to six months of your expenses in case the unexpected happens, such as a job loss or a surprise bill. Knowing that you can cover the important things can help you stay calm when you see red in your investment portfolio.
For some investors, it makes sense to have more money. A retiree, for example, may want to have a three-year buffer, because their time is more limited than those of younger investors and they have less time to recover from the market.
You can put your money into a high-interest savings account to earn interest.
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Translation of ‘loss’ as ‘discounts’
You probably don’t believe when your favorite things go on sale at the mall, so think of the market’s DowTturn as a stock market. Dips are buying opportunities.
If you continue to contribute to your retirement accounts and invest in your brokerage account when rates fall, you will be getting more shares for your money.
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Think about your time
You should think of the money you invest in the stock market as money allocated for medium-term goals, not short-term.
Ask yourself if you need this money in the next five years. If not, it might make sense to invest in the stock market and stay the course when the market goes down. For many defenders, the time frame for long-term goals such as retirement can be 20 years or more.
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Change your investing
If the market goes down and you panic, you might be tempted to hold your money on the sidelines until the prices go up. But that means you missed out on the market recovery.
Set up automatic transfers so a portion of each Paycheck goes to your investments. If you have an employer-sponsored account such as a 401(k), you may already be doing this. Transforming your planting your planting can take the emotions out of it, and removing the emotions can help you avoid panic.
Don’t constantly check your portfolio
Turn off the news, log into your BrokerAge account and focus on non-financial activities to keep your mind off the short-term Manics.
You cannot control or time the stock market, and checking your portfolio will not help. Instead, focus on what you can control: having a cash cushion and investing for the long term.
