It has been a challenging few weeks for traders. Crypto prices have recently plunged, and the Federal Reserve has also announced it will be increasing interest rates in an attempt to help with the surging inflation. Amid all of this uncertainty, stock prices have also been going down.
When the market is this shaky, it can be tempting to withdraw any investments in an attempt to salvage what’s left before prices fall even further. However, there is a better strategy that might help you avoid losing money in a market crash.
Will the stock market crash?
One of the most intimidating parts of the stock market is how unpredictable it can be. Nobody — even the professionals– can accurately guess exactly what the market will do next. Though stock prices have fallen recently, nobody knows for sure whether a crash is near.
This unpredictability makes it almost impossible to time the market or sell off your investments right before a crash happens. If you were to sell your investments right now, for example, there is always a chance the market might rebound — and you will miss out on the potential profits.
It is also possible to wait too long to take your money out of the market. If you were to withdraw after prices fall, you could end up selling your stocks for less than what you paid for them.
Although stock market volatility could be unnerving as a trader, the good news is that it does not necessarily matter what the market does. It might sound counterintuitive, but the best way to handle volatility is to do nothing at all.
The easiest way to keep from losing money
One of the most crucial things to remember when investing money in the stock market is that you won’t lose any investments unless you sell. Even if the stock prices drop, you have not technically lost anything as long as you keep holding your investments.
Eventually, the stock market will bounce back. The stock market has had dozens of crashes and corrections over the years, and it has bounced back from each one of them. Sometimes it can take months or even years, but eventually it will recover.
By holding onto your stocks, you could simply wait for stock prices to rebound. Again, you will not lose anything if you do not sell, and if your stocks survive, your portfolio will bounce right back.
The key, then, is to make certain you are investing in quality stocks that have long-term potential. The best stocks are the ones that have solid underlying fundamentals, as they are the most likely to survive high volatility within the market.
While nobody knows for sure what the future holds for the stock market, you could start preparing now. By double-checking that each stock you own is a solid investment with long-term potential and being prepared to hold onto your stocks despite volatility, you will be ready no matter what happens in the market.