130) What Did You Do During Market Downturn?

130) What Did You Do During Market Downturn?

If you are an investor, you would be very happy investing on the up trending market. You would be glad to see that your previous investments are already making money.

When asked to invest more, you are most willing to put in even more money. Many times you will regret that you did not put more previously.


This is a happy situation in the growing market. Does not matter what the investment is. It can be stocks, property, gold, unit trusts. In fact, you will be happy if whatever you bought earlier (and cheaper) and now the price had gone up.

This is a the EASY scenario...

But, what happens when the market turn around.

Whatever you bought earlier had dropped in price.

What Should You Do During Market Downturn?

Many investors faced this dilemma during market downturns.

There are basically 3 options you can take:
A) Sell everything, even at a loss. Cut your losses.
B) Hang on to your investments and wait till the price recovers.
C) Buy more to average down the per unit cost.

If you take option A, then you can preserve your capital. You can buy again when the market really dropped the prices. If the market continue to drop then you are safe.

However, what happens many times were that after you sold, the price went back up. It was like the market purposely waited for you to sell and immediately start to go up again.

For those who take option B, you wait it out. You believed that the market will recover back up again.
However, many times the market keep on dropping lower and lower. Really testing your patience. As the price goes lower, your emotions will take over you.

It will scream at you to do sell. Sell now and Cut Loss. Sell before it goes lower.
If you sell, and then the stock dropped more, you save some money.

But what if after you sold, then it came back up. Back to same as before, but you sell at an even lower price.

By now, you are very sure that Mr MARKET is really watching your every move.

If you choose Option A, you are a trader. You want to time the market. Trying to decide when is the best time to buy and sell.

 
 

Option B is an investor. You invest in good companies and wait for the companies to earn profit and the stock price to go higher. You keep for a long period. You are not too worried about the up and down of the stock market.

Option C is a better investor. When a good company share price had dropped for whatever reason, you invest more. You invest more because the company value is still there, but the share price had dropped.

Take note that share price and share value is not the same, as per quotation from Warren Buffet.
 

The best investor knows what and when to buy.

You can find out which companies are good and had been making good business over many years. The companies that survived the "market crashes" and still doing well now.

If you have the knowledge, skill and time, you can do your own research and look for these good companies.

But what do you do if you have no knowledge, no skill and no time to manage your investment?

One easy and good method is to invest in Unit Trust Equity funds.

The Unit Trust Management Company have a team of fund manager and research personnel to look for good companies that have values in their stocks. They are the people who have the knowledge, skill and full time working on it. Moreover, a team is better than you alone.

Furthermore, you have many funds to choose from. You can switch from one fund to another. If you really think that the market is going to crash, you can preserve your capital. You can switch from equity to a bond fund or money market fund.

You may have to pay a small admin fee for the funds switching.

Do find a Good and Reliable Unit Trust Consultant to assist you in your Unit Trust investment.
You may be surprised on how much they can assist in your financial planning.