Stock market turbulence can be a terrifying experience for investors who are unsure on how to handle it. Towards the end of 2018 we saw a trend of the Dow, in particular, seeing sudden changes in price, mostly falls during this particular patch. The unpredictability of the movements during these patches is what makes it difficult to work with. If you knew the market was just going to fall, you can react to it and even take advantage of it. With the sudden nature of these falls and rises, it’s harder to find a working gameplan. We’ve got a few tips to keep you in the game though.
1. Invest in Individual Stocks, Not Markets
The market overall at these turbulent times can shift in an instant. “What’s the Dow Jones today?” can be a scary thing to be asked if you’re invested in the Dow Jones itself – but it isn’t quite as troublesome if you invest in individual stocks instead. This way you can pick reliable companies or sectors and stake your cash on those businesses. It avoids the overall swings of the market and some companies have an incredible amount of reliability – this means they won’t be moving much upwards either though, but that can still be very attractive during a wild market.
2. Spread Your Portfolio Globally
While some markets enter wild patches and tough times, other markets around the world might not be. Sure there are global recessions and events which affect other parts of the world as much as our own markets, but a lot of the turbulent times for markets are quite localized. This would be a good time to start looking at markets in places like Asia and Europe to see if there are better opportunities available. Some investors even profit handsomely from routinely switching between markets, depending on what’s hot and where they believe opportunity will arise.
3. Switch to a Defensive Strategy
This can be a good time to just accept it might be difficult to earn a profit and switch to a defensive game plan instead. This would mean shifting your cash to investments which are much more stable and safe. Obviously, these types of stocks and shares aren’t going to increase much in price either, but the stability is a good thing for now. In the future, when the wild market has finally begun to settle down, you can shift your cash back in and look at being more aggressive and pursuing a profit.
4. Be Prepared to Capitalize on Low Prices
With a turbulent market, the problem is often sudden drops. Not many investors are bothered by sharp rises, though it can still be unsettling. When prices do drop suddenly though, there will be a bottom out point at some stage. This is the lowest the price will fall before it begins to rise again. It’s also the perfect time to capitalize and buy into the market so you can make a huge profit. The problem is it’s hard to predict, but with a little due diligence, you should be able to figure out a fair price to purchase it. It’s possible the price still drops further after you do, or has started rising before you buy, but either way the important thing is that you’re capitalizing and making a profit from the circumstances you’ve been handed.
