How To Handle A Stock Market Crash
The media loves nothing better than a bit of drama, and if things are a bit dull there is nothing like a few emotive headlines using dramatic words like “Crash, Wipe Out, Massive Losses, and Melt Down” to create that drama, get hearts racing and newspapers sold.
When stock markets take a downward turn - it is inevitable and this will happen - it’s a wonderful time for doom mongering and hype, and it’s no wonder investors can get rattled and uncertain about what they should do.
Even as a seasoned investor, having ridden the wave of four significant stock market corrections over the past 18 years and know that wealth success comes from riding it out, when bombarded with terrifying headlines, alerts and warnings it can take some focus to stay calm.
The first panicked instinct is to run like hell and get off the sinking ship with what ever you can. This means to sell everything. THIS IS ALWAYS A HUGE MISTAKE!!!!
Any valuation of investments you own at any point in time is just that – A VALUATION!
When people tell me they have lost money because the stock market has gone down the first thing I ask them is whether they sold their investments at that particular valuation. If they say no, it’s just what the current value is, then I remind them that they have lost nothing. You still own the underlying companies that make up your investment. Nothing has actually changed and YOU ONLY LOSE IF YOU SELL!
So how do you hold your head while everyone else around you is losing theirs?
Firstly – change your language, take back your power and don’t get sucked into the drama. Remind yourself that nothing is crashing, nothing is sinking – the market is just currently riding the downward part of the waves that make up the investing world.
Secondly – realise that the downward correction on the stock market is actually a brilliant MEGA SALE!!!! You can snap up more units of your chosen Index tracker unit trust fund or EFT at a lower cost. As Warren Buffet so sagely suggests, to be successful in the stock market we should be “greedy when others are fearful and fearful when others are greedy”.
Knowledge is the key – understand what is going on before you take any action.
I’d love to hear your thoughts on handling the emotions of stock market corrections and let me know what point from this article has helped you most.
Email me on [email protected] - I'd love to hear from you.
Huge love,
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