The “Charging Bull” statue in Bowling Green, New York Financial District.
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The US stock market is declining again.
All three major U.S. stock indexes fell on Monday, topping the stock with fears that a rise in Covid-19 could hurt the economy. The Dow fell more than 700 points, the S&P 500 fell 1.6% and the technically heavy Nasdaq fell 1.1%.
The sharp decline came after all three indices on Friday sharply broke the winning streak as inflation fears rose. Just weeks ago, stocks hit an all-time high.
While volatility can be a concern for investors, experts warn against any hasty sales when markets fall. In addition, falling stock prices may be the main buying opportunity that investors should take advantage of.
Instability is common
First, accept market volatility, which is relatively common, as a normal part of the investment process – the best way to overcome inflation. million assets.
“Accept the instability, because investors are being paid for their own shares,” he said.
This means that investors need to stay calm even in the event of extreme movements. As stocks have risen in recent months, long-term market earnings are still based on the same things. Capital Advisors, which owns about $ 800 million in assets.
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Moving up and down can also be a good time to review your asset distribution. If you are worried about a big drop, you can turn part of your portfolio into less risky stocks to protect yourself from a possible market correction that is more than a 10% drop.
For example, now may be a good time to look at major consumer products, say Morgan Stanley analysts.
Instability can be your friend
In addition, sharp declines can also be an opportunity to buy more shares and generate further profits for yourself, according to Abrams.
This is because when stocks fall from recent heights, they trade at a discount և they are likely to return at some point, which will bring more returns to investors.
Keeping money in the market when it is declining, as opposed to selling, is a great way to make sure you do not miss a return. The data show that in the event of a market downturn, selling can pull you out of the game for the strongest impact.
For example, if you missed the top 20 days of the S&P 500 in the last 20 years, your average annual income would drop to 0.1% from the 6% you would have earned if you had continued training.
And even with the recent market downturn, stocks have been strong this year. Prior to closing on Friday, the S&P 500 was up more than 15% year-on-year.
Do you have an emergency fund?
Of course, even if you know that stock market volatility can benefit you in the long run, financial advisers still recommend having a cash emergency fund on hand so you can get out of the market crisis without selling.
If the stock market is falling, it is better to spend the money in your emergency fund than to sell the assets with impossible compensation, according to Tony abiegala, Strategic Wealth Partners, Independence, Ohio, CEO ավագ Senior Wealth Advisor. -founded company with more than $ 500 million in assets.