How to handle a market downturn

Image result for stock market crash

It has been all over the news this week. Most stock exchanges around the world have taken a tumble in light of economic difficulties in China and falling oil prices.

After years of bull market, the bear has reappeared. A bull market is when share prices are rising and everything is fine. A bear market is the opposite.

Many people wonder what they can do during market turmoil. Many also worry about losing money. The surprising -and short-answer is to stay put.

It is a bit the same as when you are flying and experiment turbulence. You don’t just exit the plane because the ride is getting a bit bumpy…well you actually can’t!

  • Don’t try to time the market: The vast majority of people can’t, you are no exception.
  • Diversification is key: have a variety of assets such as bonds, cash, real-estate as well as stocks.
  • Avoid becoming emotional: this is probably the hardest thing to do, but stick to your investment objectives and risk tolerance.
  • A bear market is as normal as a bull market: it is part of the business cycle and even life I would say. You can’t expect things to always be on the bright and sunny side.

Remember: as long as you are not selling your investments, you are not actually losing money. The book value and the market value of your portfolio are 2 different numbers.

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