For quite some time now, the crypto industry has been experiencing a market downturn and it's beginning to look like it has come to stay. It's natural and unavoidable to grow uneasy during periods like this.
Yeah, you might start asking yourself questions like - "What if I don't get to make profits anymore?" "Is this what a bear market looks like?" "What should I consider doing now?" These questions and many more keep popping up and you might see yourself in an endless circle full of endless questions, if proper planning is not considered.
Now hang it there, the truth is, it's bound to happen- definitely, there will be a market downturn even in local industries, not to talk about an industry that is highly volatile.
“Sustained or sharp declines are bound to make investors uncomfortable while they are happening. But there are steps you can take to put times like this in perspective and perhaps even benefit.”
~ Marci McGregor
Now you might be wondering, "What exactly do I need to do?" "What are the best steps or preventive measures to take?"
Not to worry anymore, below are a few tips on what you should do during a market downturn.
5 Safety Measures To Practise
Here’s what you should do to make the most of the market opportunity as you navigate through a prolonged decline.
Avoid making rash decisions.
When the market falls, it can be tempting to sell and wait for asset prices to rise again. However, this can lead to costly errors. You risk locking in a permanent loss of capital if you sell when the market has fallen drastically.
Revisit your goals and risk tolerance.
During a bull market, it’s easy to overlook how uncomfortable it may be when your assets decrease in value, especially if they’re assets you’re dependent on to meet a short-term goal.
“One way for investors to help limit the effect from a market downturn is to invest in longer-term, high-quality bonds, such as Treasurys and very high-grade corporate and municipal bonds.”
~ Matthew Diczo
Explore for strategic opportunities.
In a market downturn, conservative sectors such as consumer goods, healthcare, and utilities, as well as companies with stronger operations and accounting records, may present opportunities. You might also want to use this opportunity to focus more on other recreations or skills aside from trading, just to keep your emotions in check.
By investing a certain amount of money at regular periods regardless of market conditions, you’re more likely to be able to purchase assets at more affordable prices and the assets may appreciate in value once the market recovers.
Making regular weekly or monthly deposits to your portfolio— a strategy known as dollar-cost averaging—is a type of systematic investing that can help you save money when the market is down.
Markets have recovered back in the past, no matter how severe or extensive the downturn was.
“Bear markets have been seen before, and anyone looking at the historical price charts can see that those markets have recovered to grow higher than before.”
~ Marci McGregor
In a market downturn, investors who remain calm and disciplined are more likely to avoid frequent mistakes and benefit from better times ahead. The longer you stay invested, the more likely you are to achieve your long-term objectives.
Being patient during a market downturn would really go a long way, because the market won't stay like this forever. You may have to turn off the financial news for a while. Remember to take profits, and also keep some cash in store in case of a crash. Don't forget, it's important to have a clear head to maintain proper perspective. You'll need this to return safely to your portfolios by the time the downtrend is over.
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