It’s been a rough couple of months for the stock market. Amid all the turbulence in the world right now, stock prices — particularly within the tech sector — have taken a tumble.
That uncertainty doesn’t appear to be lessening, either, which could mean that more market volatility is on the way. It’s an unnerving time to be an investor, and some people may be considering withdrawing from the market until things stabilize.
What does that mean for your investing strategy? Should you really be investing right now or should you hold off? Here’s what you need to know.
Is it really the right time to invest?
When the market is shaky, pressing pause on investing may seem like the right move. After all, why would you sink more money into the market when stock prices are falling?
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However, downturns can actually be a smart time to invest more, not less. Stock prices get lower during downturns, which means now is a great chance to buy at a discount. When the market recovers, then, you’ll reap the rewards.
The market has always rebounded, too. Nobody knows when that might happen this time, and there’s a chance things will get worse before they get better. Historically, though, the stock market has experienced dozens of corrections and crashes, and it’s recovered from every single one.
Investing during downturns can also help reduce your costs over the long term. If you only buy when the market is thriving and prices are high, you’ll end up spending more over time than if you invest during the market’s low points, as well.
A few things to consider before you buy
Downturns may be a smart opportunity to invest, but there are a couple of factors to consider before you dive in.
First, make sure you can afford to invest right now. Ideally, you should have at least six months’ worth of savings stashed away in an emergency fund. Downturns can be a terrible time to sell your stocks (because prices are lower and you’ll be selling at a discount), so an emergency fund can ensure you’re able to leave your money invested if you face an unexpected expense.
Also, if you don’t have much spare cash, it’s OK if investing is not your top priority. Focus first on paying the bills, building an emergency fund, and paying down high-interest-rate debt. If your finances are in good shape and you have extra money to play with, then consider investing.
Finally, if you decide to invest more, choose your investments wisely. While the stock market is extremely likely to recover from a downturn, not all individual stocks will. By sticking to stocks that are strong long-term investments, it’s much more likely your portfolio will rebound along with the market.
Stock market volatility can be nerve-wracking for even the most experienced investors, but there’s a light at the end of the tunnel. By choosing the right stocks and staying invested for the long haul, it will be easier to survive any potential storms.
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