How To Make Money During Stock Market Correction?


◊ Business & Finance News – Stock Market News Today ◊


 


◊ How to Deal With a Stock Market Correction ◊


Stock market corrections are scary but normal. In fact, they’re a sign of a healthy market in most cases. A stock market correction is usually defined as a drop in stock prices of 10 percent or greater from their most recent peak. If prices drop by 20 percent or more, it is then called a bear market.


11 Realistic Ways To Make Money Online Today {2019}


Frequency of Market Corrections… Stock market corrections occur, on average, about every 8 to 12 months and, on average, last about 54 days. According to Fidelity (as of May 2010) since 1926, there have been 20 stock market corrections during bull markets, meaning 20 times the market declined 10% but did not subsequently fall into bear market territory.

How to Deal With a Stock Market Correction… First, resist the urge to “time the market.” Although it’s possible to make some short-term money trading the ups and downs of the market, strategies like swing trading rarely work for building long-term wealth.

Most people lose money by trying to move their money around to participate in the ups and avoid the downs. This is a documented behavior studied by academics around the world. The field of study is called behavioral finance.

Data show that not only do most people lack the discipline to stick to a winning investing playbook in correcting markets, but they also tend to transact at the wrong times causing even larger losses.

As a professional financial planner, our job is to build portfolios based on science vs. behavioral biases. When we build a portfolio, we expect that one out of every 4 calendar quarters will have a negative return. We control the magnitude of the negative returns by selecting a mix of investments that have either more potential for upside less potential for high returns and also less risk—called diversification.

If you are going to invest in the market, it is best to understand that stock market corrections are going to occur, and it’s often best to just ride them out. Resist the urge to trade and profit from them. Follow the old Wall Street cliche—never catch a falling knife.

Example: 2018… In the past 5 years going into 2018, the Dow Jones Industrial Average has nearly doubled without any meaningful pullback. For each of those years, a significant number of analysts have called for a correction or even a recession. These predictions have caused investors to pull out of the market too early and lose the impressive gains they could have seen if they didn’t try to predict with the inevitable would come. This is true of individual investors as well as professionals.


Start Trading Now or Try a FREE Demo Account


How to Control the Magnitude of Market Corrections You Experience…
You can control the magnitude of the market corrections you might experience by carefully selecting the mix of investments you own.

First: Understand the level of investment risk associated with an investment. For example, in an investment with what I call a Level 5 risk (high risk), there is the potential you will lose all of your money. With a Level 4 risk, you might experience a drop of 30-50 percent, but you won’t lose it all. That’s a big difference in risk.
You can see a series of graphs that illustrate the amount of risk in different types of investments in Does Taking on Investment Risk Deliver Higher Returns.
Second: Understand how to mix these different types of investments to reduce the risk to your portfolio as a whole. This is a process called asset allocation.
It’s important to reduce your exposure to significant market corrections as you near retirement. And once retired, you need to structure your investments so when market corrections occur, you are not forced to sell market-related investments. Instead, you use the safer portion of your portfolio to support spending needs during these times.


Funding Opportunities Available


Third: Understand the risk-return relationship of investing. The potential for higher returns always comes with additional risk. The higher and faster the price of the stock market rises, the less the potential for future high returns. Just after a stock market correction, or bear market, the potential for future high returns in the market is greater. In 2017, cryptocurrency became the craze. It had a return of more than 1,000 percent in the year and retail investors scrambled to get in while professional traders stayed away. Why? Because the professionals know that when something goes up that much, it will eventually have a severe correction.


11 Realistic Ways To Make Money Online Today {2019}


The last thing to know: If you don’t want the potential to experience a market correction, it is probably best to avoid investing in the market altogether. Instead, stick with safe investments. But safe investments have what we call opportunity cost—you miss the opportunity to set yourself up for the future life you envision for yourself and your family. The key is to strike a good balance.







TODAY ›
NEWS ›
STOCK MARKETS ›
BUSINESS ›
ECONOMIC INDICATORS ›
COMMODITIES ›
INSIGHTS ›



 



Categories: Insights

Tags: , , , , , , , , ,

32 replies

Trackbacks

  1. US Removes Some Items From China Tariff List – Stock Market News Today
  2. Stocks Rally on Tariff Delay – Stock Market News Today
  3. German Economic Sentiment Tumbles To Lowest Level Since 2011 – Stock Market News Today
  4. Bond Market Recession Signal … – Stock Market News Today
  5. Wall Street: Strong Retail Sales Data – Stock Market News Today
  6. Hopes of Bigger-Than-Expected ECB Stimulus Measures Lift Stocks – Stock Market News Today
  7. How To Start Trading Stocks Online? – Stock Market News Today
  8. Investing for Beginners – Stock Market News Today
  9. Economic Calendar: Top 5 Things to Watch This Week – Stock Market News Today
  10. Trump Wants to Buy Greenland … But Why? – Stock Market News Today
  11. Home Depot Cuts Sales Forecast – Stock Market News Today
  12. Italy’s Government Collapsed – Stock Market News Today
  13. 5 Stocks To Buy Today … { September 2019 } – Stock Market News Today
  14. Asian Stocks Cautious Ahead of Powell’s Speech – Stock Market News Today
  15. Trump Orders U.S. Businesses to Find Alternative to China – Stock Market News Today
  16. Start Trading in The Stock Market in 5 Steps – Stock Market News Today
  17. G7: The Summit in France Comes Amid Fears Over a Global Economic Slowdown – Stock Market News Today
  18. Natural-Gas: Prices in Europe and Asia Plummet to Historic Lows – Stock Market News Today
  19. Stock Market Today: U.S. Stock Futures Point Sharply Lower – Stock Market News Today
  20. Trade War: China & U.S. to Hold Trade Talks in October – Stock Market News Today
  21. Trade War – As U.S. and China Squabble, Australia Seizes Trade Opportunities – Stock Market News Today
  22. Gucci Sales Dropped in U.S. – Stock Market News Today
  23. Boeing Co: U.S. Might Approve the 737 MAX to Fly – Stock Market News Today
  24. Australia’s Jobless Rate Unexpectedly Climbed – Stock Market News Today
  25. Business News Today: Microsoft to Buy Back Up to $40 Billion in Stock – Stock Market News Today
  26. Global Stocks Inch Up On Trade Hopes – Stock Market News Today
  27. Philip Morris & Altria End Merger Talks – Stock Market News Today
  28. Conagra Brands Beats Profit Expectations – Stock Market News Today
  29. Tokyo Inflation Slows To 16-Month Low – Stock Market News Today
  30. Global Stocks Lifted by Hopes of More Easy Money – Stock Market News Today
  31. 29% of Americans are Considered {Lower Class} – Stock Market News Today
  32. The Number of U.S. Stocks Hitting Fresh 52-Week Highs Has Fallen Since June – Stock Market News Today

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: