Throughout the entire year in 2013, we seemed to see highs everywhere we looked. Unfortunately, the year 2014 hasn’t been so friendly.
The simple fact is, for the last month and a half we’ve watched as emerging markets seemed to crash, Apple reported that it couldn’t sell its flagship product, and more and more stock values going down. These are the types of things that generally scare people when it comes to investing. That’s why few want to invest in a down market. However, that fear of loss is what’s stopping so many people from realizing profits.
Why Investing In a Down Market Is a Good Idea
Let’s think about the reason you’re investing in the first place. You want to put one dollar in, and pull out two, then put the two in and pull out four. You’re not investing because you think it’s cool when the line on the chart points to the upper right corner of your screen, you’re investing because when it does so, you make money. We invest for profits. Now, let’s think about how we make profits. Drum roll please…we make profits by buying low and selling high!
The answer to the big question, “Why should I invest in a down market?” is simple. Investing while the market is low gives you the opportunity to buy at incredibly low prices. When else are you going to get a 10% discount on stocks? Although the market may be down when you buy the stock, it’s not going to be down forever. By making the right decisions with regard to what to buy, you stand to make a killing off of the down market!
Making the Right Decisions
Now here’s your key. No matter if the market is up or down, you’re going to have a hard time realizing profits if you’re not making the right investment decisions. In a down market, that’s even more important. The simple fact is, most companies are going to bounce back from hard times, but some will not. If you put your nest egg into companies that have a low likelihood of bouncing back, chances are you’re going to lose. That being said, here are a few tips that should help you make the right investment decisions.
Think About The Companies That Make Survival Possible – OK, so we would survive without companies, we did it before civilization reared its nasty head! However, surviving wouldn’t be half as fun for many people if it wasn’t for companies like Wal-Mart, Google, and Ford. If it wasn’t for Wal-Mart, where would we get our food and such; if it wasn’t for Google, we’d have a hard time finding information we need; and if it wasn’t for good ole Henry Ford, we’d still be riding behind horses, not enjoying horse power! When you invest in a down market, think of the companies that have no choice but to bounce back!
Watch The News – Ever since I first got interested in investing, I found this one shocking, but true. The truth is, no matter how great, or bad a company is doing, the news changes the views of that company from the eyes of the investor. If big stories come out saying something negative about a company, chances are, its stocks are going to fall faster than a penny dropped from the Empire State Building and vice versa. So, watch the news and look for opportunities to capitalize on.
Don’t Use Knee Jerk Reactions As An Investment Tactic – I’ve seen this one way too much. At the slightest change some investors will either buy or sell. It’s important to remember that profiting from investing usually happens over time. Throughout this time, you’ll see ups, downs and static moments. In most cases, it’s OK, just ride the roller coaster and enjoy the fruits of your labor when you’ve made an educated decision that now is the best time to sell.
Down markets shouldn’t scare you out of the market, it should do the exact opposite. When the markets are down, your eyes should open with excitement because you see opportunity. I hope that my tips will help that to happen.
Do you have any other tips that you would give newbie investors with regard to investing in down markets?