Investing can sometimes resemble a rough swing. What to do if your investment fails and you start to lose the despair of losing your money?
Don’t do anything. The hard times will end one day and the trend will turn into growth again.
But before the much-anticipated reversal in the form of economic growth begins, we will have at least one decline next year. Capital markets are quite sensitive to the performance of the economy. It can thus be expected that the stocks will not break growth records next year either. Their value will stagnate at best, or decline in the worst case.
First aid in case of decrease in value
If you find that the value of your investment portfolio has dropped, the best shot to reduce upset is something sharper. Above all, avoid panic and frantic sales of assets held. That’s the worst thing you can do.
There is also a possible remedy in those cases where, after selling part of the portfolio, you buy the assets once sold again. If prices have risen slightly in the meantime than when you sold the securities, you have suffered a loss.
The above procedure is incomprehensible to most people. Why hold stocks and other securities such as unit certificates when everyone around is selling? The answer is simple. The decline in the value of one day will be replaced by their growth again. The sale is usually subject to lay people and inexperienced investors. Professional traders will not avoid frantic sales. However, this in cases where they speculate on a decline.
Speculation on the decline
The speculation about the decline is that the investor holds shares worth, for example, a thousand crowns apiece. The speculator bets that the stock is overpriced and that its price could fall. Therefore, he will sell it immediately. As soon as the share price drops to 700 crowns, for example, the speculator will buy the security again. The difference of 300 crowns in the share price is a profit for him. The speculator borrowed the share from another trader, to whom he will return it. The loan was of course charged a fee. However, it does not reach the amount of profit.
However, if you are an investor who holds shares for dividend payments, do not sell your securities. In most cases, the price returns to the original level, or exceeds it. However, this is not the case when you have entered the market with a one-off investment and, moreover, when the markets have been at their peaks. Then it is not surprising if you only get closer to the original value of the investment.