It's not always easy to invest in the stock market, especially during periods of volatility. The S&P 500 is down nearly 19% from its peak in early January, inching closer to bear market territory.
Downturns like these can be tough to stomach, and many investors are wondering when the market will stabilize and return to normal. While there's no easy answer to that question, there are a few things to keep in mind.
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1. Investing is a long-term strategy
Nobody knows exactly how the market will perform over the coming days, weeks, or months. Even the experts can't predict how long this downturn will last or how far stock prices will fall before they recover.
While that uncertainty can be alarming for investors, the good news is that the market's long-term performance is much more predictable. Historically, the stock market has earned positive average returns over time, despite experiencing countless corrections and crashes.
It's uncertain how long it will take for the market to recover from this downturn, but it will recover eventually. If you're nervous about investing right now, that's normal. But try your best to maintain a long-term outlook. The market has recovered from worse downturns in the past, and it will bounce back from this one, too.
2. Holding your investments can keep your money safer
One of the best ways to protect your savings during a market slump is to simply hold your investments. In other words, don't sell your stocks or try to time the market.
While it may be tempting to pull your money out when the market dips, that could be a costly strategy. During a downturn, stock prices are lower. If you sell after prices have dropped, you may end up selling your investments for less than you paid for them, locking in your losses.
If you hold onto your investments until the market inevitably recovers, though, you won't lose anything. Your portfolio may drop in value in the short term, but you won't lose money unless you sell. Once stock prices rebound, your investments should bounce back unscathed.
3. Choosing the right stocks is key
The investments you choose can make or break your portfolio during a downturn. When the market is thriving, even shaky stocks can perform well. But if the market crashes, the strongest companies are the most likely to recover.
Healthy companies make for solid investments. These companies will have strong underlying business fundamentals, which will give them an advantage during periods of volatility.
Keep in mind that even the strongest stocks will likely take a hit when the market is in a slump, so it's normal to see your portfolio lose value. But these companies have the best chance of bouncing back when the market recovers, which will keep your money safer.
Stock market downturns can be unnerving for even the most experienced investors, especially when nobody knows for certain how long they'll last or how severe they might be. But by staying focused on the future and choosing the right stocks, you can give your investments the best chance possible of recovering.
