3 Major Investment Mistakes to Avoid During a Down Market | personal financing

(Morri Bachmann)

It’s no secret that 2022 has been a tough year from a stock market perspective. Stocks have spent several days over the past four months diving into correction territory. Many investors have portfolios with balances that have fallen dramatically since the beginning of the year.

At times like these, it is important that you approach your investment decisions in a strategic manner. This means staying away from these very common mistakes.

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1. Sell stocks in a panic

Whether it’s the first bear market you’ve been in or your 10th, it’s easy to let emotions improve when stock values ​​drop. But the one thing you really don’t want to do is dump stocks when they’re down due to fear. If you go this route, you are sure to make losses, while if you wait for things to end, there is a strong chance that these stocks will recover in time.

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As a general rule, it pays to take a “buy and hold” approach to investing that keeps you holding the same high-quality stocks for many years. If you adopt this mindset, you may be less likely to panic when stock values ​​drop on a temporary basis.

2. Buying shares of a particular company just because it is idle

Downturns in the stock market have a positive side – they allow investors to acquire shares at a discount. But one thing for you no What you want to do is load up on shares of a particular company just because you have a chance to beat them at a lower cost.

Best bet? Compile a list of stocks you want to own for specific reasons, and follow those stocks when the broad market crashes. Otherwise, at least, see if companies with bad stocks are relevant to your investment strategy.

Also, determine if they have long-term growth potential. If they don’t, you may not end up getting a deal – you could end up losing a share that you regret buying.

3. Not diversifying your possessions

If you have a wish list of stocks you’re hoping to buy, swooping in when stock prices are low might make sense. But the one thing you don’t want to do is load up on too many companies in the same market segment. Doing so may throw off your portfolio balance, exposing you to more risk and potential for losses.

In fact, a better approach to investing during a downturn may be to load up on broad market ETFs, or exchange-traded funds. If you follow this route, you will get instant diversification, and you will not have to spend a lot of time researching your investment options.

Downturns in the stock market are more common than you think, and some are more short-lived than others. While stocks have been slow overall this year, things could change during the latter part of 2022.

Then again, things can go wrong. We just don’t know. But if you do your best to avoid these mistakes, you will prepare yourself to better weather the storm and move forward in the long run.

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