It's been a tough year for Wall Street, and many stocks have suffered major setbacks over the past few months.
While the market as a whole has been on an upward trajectory in recent weeks, that doesn't necessarily mean that this slump is over. In fact, some experts believe prices have further to fall, and things could get worse before they get better.
Of course, nobody can say exactly how the market will perform in the short term. But there are a few steps you can take to invest safely regardless of what the market is doing.
1. Ignore short-term fluctuations
It's easy to get caught up in the market's daily movements. While there's nothing wrong with staying updated on market news, try your best to avoid letting your emotions influence your investing decisions.
If stock prices take a turn for the worse, it can be tempting to sell your stocks. But impulsive decisions can wreak havoc on your long-term strategy, and if you sell at the wrong moment, you could potentially lose a lot of money.
While it's easier said than done, the best thing you can do during periods of volatility is to ignore the short-term ups and downs and stay focused on the long term. Nobody knows for certain what will happen in the coming months, but it's extremely likely the market will see positive average returns over time.
2. Continue investing regardless of what the market does
When the market is shaky, it may seem like a smart idea to press pause on investing. However, to maximize your long-term earnings, it's wise to continue investing consistently -- even during a bear market.
Time is your most valuable resource when it comes to building wealth in the stock market, and there will always be volatility to a degree. If you stop investing every time stock prices falter, you'll miss out on a lot of time.
Also, market downturns can actually be a smart time to invest more. Stock prices are sometimes significantly lower during slumps, which means you can snag quality stocks at a discount. Even if the market has further to fall, that doesn't necessarily mean it's a bad time to buy.
3. Invest in the right stocks
The key to surviving a downturn is to choose the right investments. Most stocks will pull through bear markets and recessions, but some will crash and burn. The more research you put into your portfolio, the better chance you'll pick investments that are likely to recover.
The best stocks are the ones from companies with solid underlying fundamentals. This includes factors like strong financials, a competent leadership team, and a competitive advantage in its industry.
While there are never any guarantees when it comes to the stock market, healthy companies are far more likely to recover from slumps. By filling your portfolio with a well-diversified selection of strong stocks, you have a much better chance of seeing long-term growth -- even if there's more volatility on the horizon.
Nobody knows exactly what will happen with the stock market, but that doesn't mean you can't take steps to prepare. If stock prices dip, these three steps can help you rest easier at night knowing your money is as protected as possible.