When markets are heading down

For shareholders, the last few days have been hell. The value of their assets is declining. No one knows how long and how deep they will get.

The Czech economy, as well as the global one, has most likely entered a recession. Only the Czechia is to spend up to ten percentage points on its gross domestic product this year. It will get to the performance in 2016 and 2017.

During the past 12th week of 2020, stock prices and their indices fell to the values ​​of 2008, thus erasing their 12-year growth. For the psyche of an investor, whether we are gender balanced), significant declines are not pleasant. They reduce the value of their investment. Even after declines, some decide to sell off part of their investment portfolio. Others even give up the stock component altogether. In both cases, however, the track and the future recovery that will come will not help them. They will not compensate for the loss.

How to find your way in the situation? How to invest and when not? We will try to answer this in this post.

Hold and do not sell

The basic investor lesson is that you as an investor should not sell in the event of any downturn. Unless you are pushed into selling your assets by external circumstances. For example, the lack of money to repay the mortgage. An ultra-careful wife can do the same. Short nipple. If you have a careful partner, they will certainly not allow you to invest in anything as unpredictable as stocks or equity open-end mutual funds. Alternatively, they will allow them, but you will not hold too significant a percentage of the ratio of your financial assets in securities of this type.

Maintain regular storage

The second piece of advice is to maintain a regular deposit. Bad times can lead to a suspension of investment. Maybe your partner will push you. Alternatively, you will have a bad time – wage cuts, termination, etc. The reasons are entirely objective and understandable. Be sure not to use the missing money for basic necessities for investment. It’s hard to see a portfolio if you starve to death or lose a roof over your head. If you are not endangered, your only goal is to maintain a regular investment. If this is not possible, do not invest. Sacrifice an investment opportunity for your stomach and your loved ones and the warmth of a family fireplace.

Seduction to make extraordinary purchases

The opposite of regular deposit is the effort to acquire shares at lower prices. The lure of the yield from the temporary slump, although it may last for a few years, is so attractive to many investors that they threaten their future by starting to buy horribly at the first major shock.

But what if the declines last longer and you don’t have the financial resources to make bargain purchases? If you are attracted by the unfavorable situation in the economy, avoid extraordinary one-off purchases and rather gradually buy. The coming further declines will not bother you as much as when you buy shares or participation certificates in a larger than smaller volume.