Activity in the economic field has never been stable. However, in some cases there is a suspension of securities carry, in order to preserve the budgets of large companies. Just such a process, when securities do not work, but stand still, is called a “market subsidence”. What to do in such cases? Maybe read https://telegram-store.com/catalog/product-category/channels/business?
Analyze the market and all data
Before taking any action, it is worth sorting out the current market situation. For starters, it is worth understanding what caused the portfolio to decline.
- Reporting issue – it happens that a company releases a report in which something does not suit investors. They begin in a hurry to sell their assets and the shares get cheaper. If the company is strong and its products are in demand among consumers, the decline will not last long and the quotes will at some point return to their previous position and keep growing.
- Presentation of new products – for example, Apple launched a new iPhone, but it did not arouse such a great interest among consumers in the first days. Investors panic and sell the stock – the stock price sags. It works the same way with reporting here. If the company is good, everything will be fine.
- Problems in the company – the news comes out, a state of emergency or any other negative event – again panic, again selling the stock, again dropping quotes. Here everything depends on the severity of the accident and the company’s actions to prevent a crisis situation. If a proper strategy is developed and the event is not worse than a news headline, the costs will be covered pretty quickly. In other cases, it all depends on the specific case.
- Economic crisis – mass default of large organizations and banks, practically all shares have depreciated by at least one third and nobody knows when it will end.
All variants, except the first, are temporary and do not affect the economic situation much. The last option, namely the crisis, is more dangerous, because in this case it is very difficult to make predictions.
What to do when it happens?
It is worth thinking about this in advance to avoid mistakes and impulsive actions. First of all, it is important to understand that you are a long-term investor. Therefore, it is unlikely that the drawdown will have any effect on the asset in the long run. More likely, everything will pay off in a few months. In most cases, a wait-and-see strategy is the best strategy for long-term investors.
If you need more proof, you can analyze what happened and find out why the stock went down in price. Was it because of minor problems or is it more serious. How long has it been going on and if there is any suggestion that the negative trend is changing. The tools of fundamental analysis and the study of the current market situation will help.
In order not to risk too much, but also not to do too much, use stop-losses. They fix the price with the maximum allowable loss and when the quotes reach these values, they automatically put them on sale. It’s a compromise between being completely calm and believing in long-term success and not wanting to let things slide.
Conclusion
So, if suddenly your investments have sagged, then:
- If you are a long-term investor, there is nothing wrong with it, if the company is reliable and profitable, there will be growth again after the decline. This is called a correction;
- To avoid taking risks, use limit orders: If the lower or upper limit of your value is reached, the assets will automatically be put up for sale, and you will not lose more than you can afford;
- Just in case, make sure everything is okay (or not) by analyzing the company and the market situation.