The Market is Plummeting? – No Worries
This is a guest post by Tanesha Morgan, writer for Personal Finance Analyst. Personal Finance Analyst is an online community of bloggers dedicated to taking the mystery out of money and helping you to live a happier, more successful life with the money you have.
Did you catch a glimpse of CNBC today? Yesterday? Any day over the past year? Then you have probably heard all gloom and doom reports about the plunging stocks market. It’s really enough to evoke panic. And it has… investor confidence is low… people are scared. But I am here to tell you… don’t worry. It is not as bad as it seems.
Actually a declining market presents the perfect opportunity to invest more money. It is like going to a mega sale at your favorite store. You can pick up all kinds of great stuff at a cheap price. Nobody gets worried when shopping at a super sale… people actually get excited about it. Well, we should also get excited when Wall Street has a super sale on stock.
We have all heard the concept of buy low and sell high. It is a really straight forward investing concept – and it works! However, when employing this strategy, there are some important things to keep in mind.
Stick with companies that have a long history of proven financial strength and growth. Kimberly Clark, Coke, ExxonMobil and General Mills are great examples. These are solid companies that have been around for awhile. Everybody knows their names and everybody uses their products. While Enron had a long history of strength, most people never knew or heard of Enron until 2000. And if the media had decided to focus on a different hot topic, many of us still would not have heard of Enron.
Don’t buy willy nilly. Do a little research and run some valuation analysis on the company. We have all heard of Merrill Lynch. But even their name recognition could not save them. Motley Fool offers a great valuation tool, Inside Value. There is a small fee, but you can try it out free for 30 days. (No, I am not getting a commission… it really is a good resource.)
Let your fears go. Realize that this is a good time to start investing, to continue investing and to invest more. In a previous life, I worked as financial planner. And amazingly, the most difficult part of the job was convincing people that investing in the stock market is a good thing… and one of the best ways to accumulate wealth. Most people were concerned that is was too risky.
Yes, there is a risk. But risk is not necessarily a bad thing. In order to reap reward, we have to accept some level of risk. And besides, we take risk all the time. We encounter all types of risk in every day life. Driving in a car, eating out, crossing the street… but those risks do not halt our lives.
Determine your risk tolerance. Invest within that tolerance… and let it go. Every 5 or 10 years or so as your life circumstances changes, you may need to reevaluate your risk. But in general, let it go. Oh yeah… and turn off CNBC… I would not want you to have a mini heart attack every time a ticker symbol scrolls across the bottom on the screen.
Doing nothing is the biggest risk you can take! Investing in the stock market, when done wisely, is always a smart choice. And investing today while prices are low is the smartest choice. I would not recommend strategies such as trying to time the market or day trading… but strategies such as buying low and holding long will never fail you.
Bear markets… market corrections should be thought of an opportunity, not a tragedy.
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