Investing is an unpredictable activity; you cannot predict when you will get high return or when your stocks will experience the ongoing sell-off in global stock markets. Therefore, in this up and down situation, an investor should prepare for every condition, as it makes sense to be panic and get rid of your holdings when the bad times come. Another way to avoid being careless in bad situation is by knowing several secrets to prevent it, and here are the points.
- Spend Time reviewing How Your Wealth is Divided
Don’t get upset with your loss, as the biggest mistake is because of you do not allocate your money in the right way. Therefore, you can learn from your defeat to hold a ‘safety’ bucket of stable assets, plus an ‘aspirational’ basket of riskier investments in the future. Moreover, you need to understand that a good portfolio should include these three things: insure your standard of living against severe short-term loss, maintain it over time and improve it. So, to prevent you from having bigger risk, it is better to put your assets into more stable bucket or increase your assets that have been stable.
- Do not Sell everything in a panic
The most awful action that should be avoided in times like this is selling at the peak of panic points and then missed the inevitable rebound. Sometimes the rebound takes weeks or years, but too often investors do not recover the losses because they keep their funds out of the market. So, be the champion, when the bad times hit you, don’t get panic as the most profitable moment sometimes comes in the bad times. Even Warren Buffet states, “we simply attempt to be fearful when others are greedy and to be greedy only when others are fearful”. In fact, Buffet finds that his best buying opportunities is when people are the most scared and have sold in a panic.
- Learn more about the bond market, especially the global bond market
A surprising fact comes from BNY mellon, from surveying of over 500 retail investors and advisors found that “70% of retail investors do not hold any global fixed-income investments and 62% do not see global fixed income as important.” This fact is quite miserable, given the size and diversity of the global bond market. Sometimes, government bonds increase in value when stocks fall in value. Moreover, while stock markets across countries tend to be quite correlated, bond markets are much less so. So far this year, government bonds of most of the major developed bond markets have performed very well. Finally, it is a good idea for having mix foreign bonds in the portfolio.