The first step to be avoided at all costs during a market downturn | Smart Change: Personal Finance

(Morri Bachmann)

Inventories have fallen significantly since the beginning of the year. And while some investors have seen their portfolios suffer more than others, it is a risky time to own money in the market.

If keeping track of your portfolio is making you more and more nervous every day, you may be tempted to withdraw your money from the stock market to cut your losses. But this may be the biggest mistake you can make during an economic downturn.

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stay on track

When stock values ​​keep dropping, it can be hard to keep calm and leave your money alone. But perhaps the worst thing you can do during a market downturn is to withdraw your money out of fear.

If you sell the shares when they are low, you are sure to lose money. Simply. But if you leave your wallet alone, there is a good chance that it will regain its lost value over time.

In fact, a really good bet now is to stop checking your wallet on a regular basis. Checking your wallet frequently is likely to wreak havoc on your mental health and possibly lead you toward impulsive decisions. If your shares are allotted to a distant stage such as retirement, there probably won’t be a need to make changes to your positions anytime soon – so don’t put yourself through the agony of looking.

What if money is needed?

You may have money in an IRA or 401(k) plan earmarked for retirement. But what if you have money in a regular brokerage account whose balance is now down, and the need for liquidity arises?

In this case, it is worth exploring different options before clicking on your wallet and incurring huge losses as a result. First, if you have an emergency fund, it’s time to raid it. The great thing about savings accounts is that your balance doesn’t change based on market conditions, so if there’s money you can access in the bank, this should be your go-to option.

Another way you might explore is to take advantage of your home ownership if you can do so at a reasonable cost. Unfortunately, borrowing rates are now up across the board, so you’ll need to research your options to see if taking out a loan to buy a home or a line of credit makes sense to have access to cash just in case. But these days, homeowners are sitting on record levels of clickable equity, so if you want to avoid big losses in your portfolio, this is a good way to do it.

Don’t take any step you will regret

Inventory values ​​can recover in a matter of weeks, months or years – it’s hard to tell.

But the only thing that he is Obviously, if you get rid of the stocks while they are falling, you are guaranteed to yourself losses. This can be a major financial setback for you. So, if you have the option to leave your wallet alone and shake off this current wave of volatility, do your best to go that route.

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