What to do if the loss from investments grows?
You have invested money in stocks. On your own or through mutual funds. Everyone can have a different amount, but every investor, regardless of the amount invested, can panic when the market goes the wrong way. The investor waits for the market to roll back, a day waits, two days, a week, and slowly but surely the market begins to fall. It seems that it has begun. "bearish trend... What to do at this point? What to do in such a case? Sell everything or wait it out. investment loss?
Determine the purpose of your investment BEFORE the transaction
You have to realize that you could have made a mistake before you even bought the stock. Before buying, it is advisable to formulate your investment goalsIt would be written down for how long you invest, how much risk you take, how much you are prepared to lose, how long you are prepared to wait for profits, whether you are prepared to suffer losses in the event of a short-term or long-term decline in the market. These and other questions should be answered by the investor even before he or she starts investing in stocks.
Based on the above, at the moment of market decline and getting a loss on investments, You need to carefully and without emotional panic analyze your investment goals/ideas. Once again, reconsider your investment horizon and your share of risk. You need to understand if you may have overestimated your capabilities and the market, or if you may have made a mistake with the timing of your investments. Such analytical work will allow you to be ready for any result.
You will need to not engage in self-deception, because deception can lead to irreparable results. If you made a mistake in choosing a stock, admit it and sell it. There is nothing wrong with that. At the same time, If you are confident in your choice, stand your ground and wait for the result. In any case, it is necessary to reevaluate your portfolio without deceiving yourself or exaggerating your investment abilities.
Don't look for an advisor to help you with the resulting loss of investment
If there are major changes in the country/world, such as a war, a regional disaster, global construction, economic sanctions, unpredictable actions by the central banks of major economic players, unexpected adoption of laws, it is imperative to reconsider your investment objective/idea and, accordingly, your market behavior (reduce buying or temporarily make buying industry stocks a priority).
Don't look for an advisor at this point who will solve your problems and give you advice. Make your own decisions. If you do not have a staff of analysts who work for you, then at the time of market decline, crisis, no one will reveal to you the real state of affairs, although around there will be a huge number of willing to give advice, even for free.
Sometimes, you can simply "forget" about your investments and get carried away with something for a while (vacation, building a house, having a baby). And when you "come to your senses," you will be able to make the right decision in cold blood, without panicking. We must admit that this recommendation is not suitable for those who make transactions very often (for speculators).
At the moment when Trader begins to lose money, his emotions begin to overtake him, and it becomes more difficult to remain calm with each passing hour. In this case, get some exercise or do your favorite activity. Watch your favorite movie or read an interesting book. This will allow you to "defuse" your mind and let your emotions subside.
Rules for the right investment strategy
It is worth summarizing that all decisions should be made only after careful thought and analysis of the situation. It is extremely unhealthy to think about buying or selling a stock when you have been concentrating for hours on your monitor screen watching your stock fall.
A few hours, weeks or even months is the period for which you, a real investor, can postpone trading in the market.
If you invest for the long term, your ally will be time, which will allow you to be sure that you are right.
When I started investing in April 2011, I decided for myself that I would follow the strategy of unconditionally holding shares until my passive income reached at least 20-30 thousand rubles per month. Then I will probably withdraw some of my passive income. But, as you probably know, it was in April 2011 that the stock market went down. Since the basis of my diversified investment portfolio is mutual funds, I think you understand that I am sitting in drawdown. For some funds the loss has reached 70%. The total portfolio drawdown is about 10%. Frankly speaking, what I have not suffered in my imagination. And hopes for a rapid rise of the market and ideas about the market decline. But the above advice helps me keep my emotions in check. And I continue to follow my original strategy.
I chose this investment strategy precisely because I did not invest money, the loss of which would greatly affect my life. Yes, losing them would be a sad experience for me, but I hope for the right path and realize that, for me, revising my investment strategy during a downturn is not always the right thing to do. Keep in mind that not everyone is suited to a full investment retention strategy. You need to build a strategy based on what kind of money you invest, for how long, in what instruments, what investment loss you'll get over it, etc. But once you've decided on a strategy, changing it every time you have doubts is not the best thing to do.