November 16, 2020
By Rahul Iyer
Investing during uncertain times is scary. Your heart and gut tell you to pull out of the market. But your brain (and the experts) say otherwise. So what do you do?
Use these tops tips to get you through these (and other) uncertain times.
1. Don’t be Fearful
This is probably the hardest tip of them all. Don’t fear the ‘uncertain times.’ Don’t focus on the market’s losses. Instead, take advantage of them. Think of this as your opportunity to ‘get in’ to the market.
What if you were able to buy into an investment that used to be unaffordable? As the market improves, you’re right where you wanted to be, but couldn’t afford it before.
This should be your keyword during any time, but definitely during uncertain times. Always diversify your investments or don’t put all your eggs in one basket. When you spread out your investments, you’re less likely to lose it all when one area tanks.
Diversifying means buying stocks in different industries as well as spreading out your investments between stocks, bonds, and other assets – don’t put all your money in one type of investment or you risk a total loss.
3. Know your Risk Tolerance
Without making emotional decisions, evaluate your portfolio. What’s your risk tolerance? Can you withstand a major loss? In other words, do you have time to make it up?
If you’re close to retirement or another major milestone, your risk tolerance is low and you should pull out to preserve your investments. If you’re further away from the ‘event,’ you can stick it out and see what happens, but within reason.
4. Focus on the Long-Term
It’s easy to focus on what’s going on right now, especially when it’s not good. But think about the long-term. Where do you stand?
Look at it this way – with falling stock prices, you could buy low and hopefully sell high at some point in the future. Isn’t that the point of investing? You could even add to your existing investments, buying the stocks while they are ‘on sale,’ furthering your future earnings.
5. Get Professional Advice
No matter what you do, get professional advice to figure out the situation. It’s easier to talk to someone who doesn’t have a vested interest. You obviously have a vested interest as it’s your retirement.
Talking to a neutral third party who can help you see the big picture helps. You may make more rational decisions. Who knows, you may even find yourself investing more in the market when you thought you’d pull out entirely.
The bottom line is don’t give up. These are trying times for everyone, but it will work itself out one way or another. While you may not see the large portfolio you want right now, it doesn’t mean you won’t see it in the future. Stick to your plan, bail if you have to, but otherwise, get into the investments that will fuel the big picture.