What To Do When The Stock Market Crashes

Every time the market declines, there is mass panic among investors. More often, this is because the media need to publish news worth content and like to make out that things are worse than what they really are.

But there’s a saying that applies when this happens. “Fear breeds fear.” If people buy into the media spin and sell their stocks, this will lead to a further decrease in the market.

Each time the market goes down, you can bet it will be published and linked the to the Global Financial Crisis in 2007.

 

 

 

So, more people sell their stocks and create this vicious cycle.

When this happens, here are a few things that you can do to either minimise your losses or make a profit.

The first thing you should do is you should always refer to your investing plan. If you don’t have an investing plan, you need to get one. The plan’s going to dictate whether you’re holding onto your stocks for the next 30 years, or whether you’re day trading it, or whether you’re investing for a medium term.

A good investment plan will have an exit strategy. The exact exit point will vary between investors. For example, some hedge fund managers will sell a stock when it has hit a 20% decline from its highest point. This gives you absolute clarity on an exit strategy.

The second thing you should do is check to see if there’s anything fundamentally wrong with the stocks that you own.

 For example, if Coca Coca goes down by, let’s say, 5% in a month, have a look at the news, have a look at the CEO report, and have a look at information to see if that stock has anything wrong with it. Is there any big news?

is there anything that’s going to get in its way from growing and distributing? Are they still going to have distribution in major supermarkets, 7-Eleven and cinemas and McDonald’s?

If that all seems to make sense, and it’s just market reaction, then you probably shouldn’t do nothing at all. Check to see if anything has fundamentally changed since you bought the stock.

 There’s a great recent example of something that happened at Apple. China announced that they’re going to ban iPhones within the country. So that’s something that’s more than a knee-jerk reaction.

 That’s something fundamentally wrong with the business model and the strategy, because that’s a big sales avenue for Apple in terms of generating revenue, but also generating returns for the stockholders. But don’t go for the knee-jerk reaction straight away.

Don’t invest based on the news. Wait to see what the CEO’s response is, first. A lot of amateur investors  get caught up in the news and act without thinking. Wait and see what the CEO has to say, because that’s their responsibility. CEO’s need to communicate to shareholders how they plan to address the major issues of the business.

If you like the response and believe in the strategy the CEO has put forward, the stock may be worth holding onto. But if they come out and announce a load of crap, then it might be worth getting out of that stock.

And the other one is just to observe what’s going on. Observe how people are reacting and observe the headlines that the media is putting out. Media get paid to generate a headline.

So look at how hyperbolized they become. Look at the news, look at the media and what they’re doing. Have a look at how other investors are reacting and have a look at yourself, how you react to your portfolio going down by that.

The goal here is to take check the emotions of yourself, the media and other investors so the next time it happens, you are in familiar territory. Being comfortable in this situation means that you can make sound investing decisions and great profits.

 

 

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