The 1 move to avoid at all costs during a bear market | Smart Change: Personal Finances
Inventories have been falling sharply since the start of the year. And while some investors have seen their portfolios hit harder than others, it’s a precarious time to have money in the market.
If tracking your portfolio makes you more nervous every day, you might be tempted to withdraw your money from the stock market to minimize your losses. But that could end up being the biggest mistake you can make in a downturn.
stay the course
When stock market values continue to plunge, it can be hard to keep your cool and leave your money alone. But perhaps the worst thing you can do during a market downturn is to withdraw your money out of fear.
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If you sell stocks while they are falling, you are sure to lose money. It’s so simple. But if you leave your wallet alone, chances are that over time it will regain its lost value.
In fact, a very good bet right now is to stop regularly checking your wallet. Frequently checking your portfolio is likely to wreak havoc on your mental health and potentially lead to rash decisions. If your actions are destined for a distant milestone like retirement, there’s probably no need to make changes to your positions anytime soon – so don’t even go through the torture of watching.
What to do if you need money?
You may have money in an IRA or 401(k) for retirement. But what if you have money in a regular brokerage account whose balance is now depleted and a need for cash arises?
In this case, it pays to explore different options before mining your portfolio and incurring significant losses as a result. First, if you have an emergency fund, now is the time to loot it. The advantage of savings accounts is that your balance doesn’t change based on market conditions, so if there’s money you can access in the bank, that should be your go-to option.
Another avenue you could explore is to tap into the equity in your home if you can afford to do so. Unfortunately, borrowing rates are now on the rise across the board, so you’ll need to research your options to see if taking out a home equity loan or a line of credit makes sense to access cash in one go. wink. But these days, owners are sitting on record levels of workable equity, so if you want to avoid big losses in your portfolio, this is a good way to do it.
Don’t move you will regret
Stock values could recover in weeks, months or years – it’s hard to know.
But one thing that is Clearly, if you sell stocks while they are falling, you are guaranteeing yourself losses. And that could be a major financial setback for you. So if you have the ability to leave your wallet alone and ride out this current wave of rockiness, do your best to go that route.
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