At some point during their stock market investing career everyone hits a bad patch, a spell where you have a reverse Midas touch and everything you touch turns to…you know what. During these trying times there are a few different strategies and approaches which could help you get through the crisis.
The first rule is not to panic. This is easier said than done, and watching your shares slide on an hourly basis is on of the toughest stock market investing moments which you are likely to encounter. What you need to consider is what caused the blip and how long is it likely to last.
If the fall has been caused by an overall market slump then you need to look at the reasons for it. It could be that the whole global economy has had a set back due to some devastating news; a big bank falling, a terrorist attack or something similar. Is this something which is likely to have a long term impact on the value of your shares or is it a knee jerk reaction from a world which has been gripped momentarily by fear? Are the analysts predicting that it is going to be a wobbly couple of years for stock market investing, in which prices fall more than they rise, or are they more positive about there being a relatively quick bounce back?
Alternatively, the drop in prices could be due to some bad news relating solely to the affected company; a lower than expected annual profit, the failure of a new product to take off etc. In these situations we need to consider if the fall is justified and likely to be prolonged, or if the market has over-reacted and made the fall harder than it really should have been when we take into account the company’s assets and overall strength.
Whichever ever one of these suppositions applies we are still left facing the same decision and need to make up our mind whether to bail out, hold tight or even buy some more of the stock which has fallen in price. These are some of the toughest beginner stock market investing decisions to take and you will need to base your plans on a thorough analysis of the market, analyst’s comments and your own instinct.
You can follow the main advice here, i.e. don’t panic, when forex investing, or investing in any financial instruments such as derivatives, commodities or bonds.
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