MARKET CORRECTION: IT`S ALWAYS THERE
If correction hits the market, what should you do.
Do not analyze things too much. Market corrections, caused by economic reports or major events, are always there. It affects either the overall market or some factors. Investors can only do so much in countering such reports or events, and they cannot beat market declines, either.
Do little or nothing. Granted you have a strong and well-laid trading plan, it is not advisable to react at this rate. Let volatility calm and rebalance your portfolio regularly to make sure it stays within the projected allocation ranges.
Evaluate investments. Ironically, market correction is a good opportunity to look into all holdings in a portfolio. Regardless if the downfall occurs for a short period of time, it pays to look at each asset and how it performed during this period. For instance, if bonds slumped significantly than most of its counterparts, find out the reason behind the decline, as well as if it occurred frequently and surpassed its peers in sturdy markets.
Assess portfolio risk. This is a good time to review your risk appetite and all the risks in your portfolio as well. Check whether your portfolio has met your projections or not. Assimilate your emotions in parallel to your portfolio’s performance. If things go against the plan, you may opt to analyze your asset allotment and trading plan once volatility settles down.
Chase bargains. If you have stock in your portfolio, you may want to purchase quality stocks at reasonable prices. Certain factors can impact the whole market or economy, which can lead to drop in stock prices. If you see a stock with a lowered price, double-check if this is really a great buy so that your money won’t be put to waste.
Secure sufficient liquidity. Especially for retirees, it is significant to maintain enough cash reserves and overall liquidity. That way you ensure allocation to cash or low-risk, liquid investments which will enable you to finance their cash flow for at least a year without selling stocks or other perilous holdings during correction.
Forget the Media. Financial media entities deliver up-to-date, precise information about the industry. But their coverage tends to overboard in times of market correction. In simplest terms, do not just give in to each media hype. View each news with skepticism. Remember, your plan is intact more or less, without or without hullabaloo.
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