You are more likely to panic when your investments drop and quickly sell out your assets, however, this is not the best way to react when the markets go down. Reacting with your emotions and not your mind is known as “emotional investing”. As challenging as it is, try your best to focus on your existing long-term goals at this time and avoid investing decisions based on fear.
If you panic, you will make mistakes, which could lead to losses. More importantly, panicking pressures you to overlook bearish opportunities when the market recovers. Staying on track helps investors in times of turmoil.
In times of turmoil, both bad and good stocks are bearish. However, the good stock will become bullish with time, while the bad stocks will remain down. For the experienced trader, the best time to buy a stock is when a good company’s stock goes down in price, and make it a big opportunity!
Therefore, market volatility presents the best opportunity to find good stocks to buy for a potential profit upon market recovery. Opportunities like these don’t come very often. As these low prices won’t last forever, they will probably, eventually rise.
Of course, you should choose your assets wisely in times of turmoil. But what’s even more important is to keep a well-balanced investment portfolio.
Owning the right proportion of diversified assets is key to keeping your portfolio’s volatility under control. The way you allocate your investm ents largely depends on your trading objectives and risk tolerance levels.
If you decide you want to stay active in the market, there’s one golden rule that you should always keep in mind while trading: Never invest money that you can't afford to lose.
Risk tolerance is how much of a loss you're prepared to handle within your portfolio. Ultimately, you should have a solid strategy in place to hedge against your losses.