Almost every area of life disrupted by the global spread of the coronavirus and stock market is no exception.
Fear also gripped investors and sent the economy into a dive—and now we are officially in a bear market.
So, how should you handle your investments in times like these?
Here’s the first (and most important) piece of advice I have for you: Don’t panic. Some talking heads might say or do things that make you feel emotional about the situation. But it’s all going to be okay. Do you know how I know? Because market corrections happen regularly. It’s nothing to worry about.
How to Deal With Market Corrections
So, what’s the best way to protect your wealth and ride out the market corrections? Here are four practical tips:
- Investing money in the stock market is like riding a roller coaster. We need to aware of the ups and downs. If you hold on and stay seated, you’ll have a wild ride but end up safely where you want to be. But if you try to jump off early, you’re going to get hurt. Don’t let panic or fear call the shots. Stay invested when the market declines and wait for it to go back up.
- If you zoomed in and just saw the market on one lousy day, it would look terrible. And if you zoomed in and only saw the recovery, it would look amazing! Neither perspective gives you an accurate picture. When you look at the history of the stock market over the last 80 years, you’ll find that the 30-year return of the S&P 500 has been about 12%.
- Building wealth is a marathon, not a sprint. So swing trading or day trading during market corrections is not a good idea. It’s like playing a high-stakes poker game. And it could leave you broke and disappointed.
Here’s the reality of the stock market: What goes up will come down, and then it’ll eventually go back up! Take a deep breath and know that it’s all going to be okay. If you’re to build wealth, all you need to do is stay focused.