There is no doubt that the market is very volatile and has gone down quite a bit in the last 3 weeks or so. During these hard times, it is crucial for us to be careful about our money management. We will hear about many advices from personal finance sites like this one about buying more stocks when the stocks are down since we are in it for the long run. However, we all need to read these carefully or else we might risk losing all our money.
What I mean is that we need to make sure the stocks we are buying is worth owning for the long run in the first place. The articles offering advices usually steer you towards buying low cost index funds. Because of the diversified nature of index funds, the long term trend is up. However, individual stocks are not the same. A particular stock can go down, and down, and down even more and never be able to recover. Therefore, it is imperative when we read advices that we don’t blindly follow advices incorrectly. We are responsible for our money and we are the ones that need to be careful!
Cheers to the stock market because of its best long term growth. Don’t worry about the current situation and just go out and still have fun.
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{ 8 comments… read them below or add one }
I advocate buying equities when the market is down. However, you are right. The safest position for most investments is to purchase for the long term and to diversify/hedge your bets. I can afford to take risks because my investment portfolio is money I can afford to lose. Maybe not the entire thing, but a good bit. I specialize in financial’s because of my work background and because I know them and can feel their general vibe. I see a lot of companies in an industry that are down 15% and the value over the long term will go up, but the safer play would be to avoid the market if you can’t afford to lose what you put in.
Eric: Great advice! It’s amazing how people don’t often consider the risk and then blame everyone if they lose money.
Financial are going to be very iffy for a little while with many people advising to stay away until the cloud is clear.
I am new to all this, but I am buying stock in the company I work for as well as being part of the PayPal Money Market. I’m just trying to learn the ropes and stick it out, you know? Thanks for this bit of encouragement since I’ve been getting headline news in my email about the downslides lately.
Ann: If you are new at this, then I suggest going at it slowly (small amounts of money) until you get a feel and get accustomed to the volatility and adjust your expectations. That way, if the market turns around, you just made less money (but still made money).
Right now, my company deducts a small amount from my check every two weeks toward the purchase of stocks. I don’t feel the pinch of the deduction yet I’ve been able to purchase three shares this way so far. I plan to double that amount after my next raise, since it won’t affect the amount I’m already budgeting for. I’d like to retire in some degree of comfort!
Ann: Good for you. Increasing this will definitely be a good step forward in your planning for retirement. Just remember that in the future, dont’ have a high percentage of your assets in one particular stock!
Thanks for the advice. I’m still learning all this and am looking for other things to invest in.
Ann: Not a problem. Diversify is good and make sure you know your time horizon for your investments and adjust accordingly since you cannot predict what the stock market will do in the short term.