Should you put cash in the stocks you hold in if you find low market rate, or should you think to wait for a little and hold them for few a days is very tough to answer when the market is going through very rough or fluctuating phase. You need to know the ways to calm yourself during the market downfall.
As you must still remember, January 2016 end up being the worst stock market start. These type of market situation have happened much time before, and there is always a possibility it will happen again on Wall Street.
In this article, we will see how should be your response to such a crisis and how to make yourself calm in any downfall of the market.
Peep Into The History
We have seen in the past that trend is like that if the start of the year is positive the whole year will be positive, that is positive January brings the whole year positively. And at the same time, if January is negative, the whole year will have increased number of odds.
Once Robert Johnson, president of The American College of Financial Services said - As per the performance of the S&P 500 total return index this relationship has proven to be true most of the times which are more than seventy percent during the period 1966 to 2015. So, any indication that shows the market is heading in any direction then 72% of the time it should be taken seriously.
And again you must be thinking now then what is the right time to sell the stocks; you should keep waiting for those low market phase or wait for little longer.
Uncertainty in Market
The stock market is one of the uncertain fields, and one cannot predict if any negative trend in the stock market will have the global impact on the economy and the earning and performances of public traded companies. Because of this uncertainty, no one exactly knows or predicts the effect of these two on each other. That is another thing if the market is at its very low some experts go on extend to predict that it will bring the major recession.
And again you must be thinking what to do in this situation and would you like to get off from the trade market.
What Exactly You Should Do
It may be possible that your financial advisor was suggesting to you what to do with your money. There also a possibility that your financial advisor will hype about the better possibilities when he is selling you investment services and products. High expectations most of the time helps advisor to sell their products rather than thinking about your money or the risk involved.
And if your assets are producing negative returns, then both expenses and risks have a greater impact. It is the stage where you should ask yourself the following questions:
- What were your expectations regarding the performance in the case market is going up?
- What were your expectations regarding the performance when the market is going low?
- How much have you paid for the financial advisor fees and services?
- How your advisor helps you to focus on your long-term goals and provide you with the needed information about how your investment plan will work and how he is helping you to achieve it?
You should always keep in mind that you should have realistic expectations and it will yield good results. A good financial advisor also motivates you to set up realistic goals so that you won't get surprised or shocked due to the volatile nature of the market.
Your response to The Volatile Nature of The Market
Must you be going through many thoughts in your mind during the low period of the market like is it too late to bail out from the stock market? The market is already down with many thousands of points, so it is better to bail out now or wait for something good in a few days?
You should always understand that it is very difficult for anyone how more down the market will get as in the same it is difficult to predict how rise can market have. Of course, there are some tips which usually people get to analyze the recent future of the market, but no one will exactly answer how the market will behave in coming days.
These two realities about the market will lead you to make two simple choices:
- Are you sure that you are getting sound advice from your financial advisor?
- Are you sure you own the high quality of Stocks, Bonds, Mutual funds, ETF's, etc.?
Below you can have some solution of your reasoning:
- If you are sure that you have good and competent financial advice, then you should follow it.
- Why anybody likes to sell the high-quality investments in stocks, bonds, mutual funds, etc. when the market is down, and thus you should wait for the recovery of the market while selling high-quality investments.
In reality, there is not any concrete method to tell how to behave in different conditions of the market. It may be possible many people get out late and incurred huge losses and again failed to get back in late and missed most of the gains or profits, as most of the gains occurred during the short period in the market.
The simple solution which is advisable is that stay invested and rely on the quality of your advisor and your high-quality investments which surely going to generate good returns in the future.
One more good thing you can rely upon is that stocks have always outperformed and bonds to have always outperformed during the long course of time and duration, and this can make you have a better sleep at night.
This thing still exists in the stock market otherwise no new or rational investor will invest in the stock market and fall prey to risks involved in it. Just have good advice and stay calm during those low period of the market.