What to do When the Stock Market Swings

The world is in panic mode over many things, only a few of which are worth the freak-out. If you've checked the balance on your investments and noticed that some accounts have dropped, log out and take a deep breath.
What to do When the Stock Market Swings
What to do When the Stock Market Swings

The value of your stocks will more than likely come back; if you have made money from a stock or a fund in the past, chances are good that it will make you money again.

Focus on the Long Term

Unless you can put in the time to learn to day trade and buy individual stocks, you're going to be buying index investments. When indexes, such as the Dow Jones, are dropping, those stocks are now on sale. Stocks and index funds tend to drop on rumor and come back on fact. Change in society leads to volatility in the market. For example, the nasty virus and the many variants from it currently rolling around the world has impacted the supply chain in weird ways. Does this mean these products will never return? Of course not.

Bull Vs. Bear

Finance professionals remind us that the market has always come back. While a stock can rise during a bull market, those stock values can drop quickly in a correction. A correction is a short-term drop, or a short-term sale, on stocks. Knowing your market history is critically important during a correction. The bull market of 2009 to 2020 included six corrections. None of them dropped 20% and became a bear market.

Save Up More Cash

You may notice that some investors panic and dump their stocks when the market corrects, making the correction even deeper and increasing the risk of a bear market. If you feel the itch to make financial changes when the market drops, take a look at your personal spending. Thrift and frugality are an investment in yourself that will serve in good times and bad times. This doesn't mean that you have to make radical changes in how you live. Being thrifty doesn't mean that you can't also be a satisfied minimalist living in simple balance. There are nearly always ways to cut expenses and boost your ready cash to put into the market.

Get a Little Radical

If you're feeling a bit radical thanks to pressure from the outside world, consider a no-spend weekend. Plan out your meals from the Wednesday grocery ads and shop on Thursday night. From Friday morning until Monday after work, spend no money. Plan free activities with loved ones, such as a library trip, a visit to your local art museum, a picnic in the park. If you find that a no-spend weekend is easy, plan for a 10 day no-spend to boost your frugal skills. Set up an investment account with a brokerage firm that allows you to buy fractional shares. Put these no-spend savings into fractional purchases of the big guys to stabilize your investment portfolio.

Look for Sales

Swings in the market mean that you can get stocks with a strong history of producing on sale. If you can increase your investment-ready money with the no-spend steps above or by picking up a side hustle, now is the time to shop. Which companies are expanding? When a bear market hits, companies that were over-leveraged start closing branches and facilities. Their leadership team changes quickly. The value of their stock quickly moves from dropping to tail-spinning into the dirt.

Companies that were prepared for a drop in the market start expanding. Check who is getting building permits instead of asking for a bail-out. Review industrial journals to see who has been granted patents. Are they hiring more engineers while they increase their marketing budget, or are they just boosting their marketing budget? Just as you would look for companies that were prepared to grow because they had some reserves, you want to avoid over-leveraging yourself. Your initial cash investments should be enough to help you build funds to put into more risky ventures. If your initial cash investment is now gone because the stocks you bought are worthless, you just paid for a tough lesson. It happens to all of us. Keep going.

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