Are you experiencing your first stock crash, and do you see your portfolio value getting smaller and smaller? You’re not alone. In 2020 and 2021, more than two million Germans became shareholders and ETF investors. They are all in the same misery. We Fjolser have on average invested a few years longer. And yet none of us are completely unaffected by a bear market.
For you as a fresh investor, it is important, especially now in the crash, that you do not make any mistakes that will irritate you afterwards. The following three tips should help you do as much as possible right instead – so you can even benefit from the bear market!
1. Stick to it and do not panic
A deep red day in the stock market hurts. It hurts to see your own stocks fall. But as an investor, you need to learn how to handle it. Because bear markets like this will happen again and again.
Do not doubt your long-term investments just because their price is falling at the moment. If it makes you uncomfortable to look at the red numbers, practice not looking at your portfolio every day. To avoid knee-jerk reactions and panic sales, get used to going for a walk before making a purchase or sale.
You will find that your stocks and ETFs will eventually find their way back up – even if you do not worry every hour, check daily and trade every week.
2. Keep an eye out for interesting stocks and ETFs
Now for the second lesson: How can you take advantage of a stock crash?
The advantage of falling stock prices and ETF prices is that the securities become cheaper in relation to their intrinsic value. So if you are brave enough, you can use low prices for follow-up purchases. The following recovery gives you particularly large profits.
Keep an eye on exciting stocks and index funds, and learn about basic valuation measurements such as price-to-earnings (P / E) ratios. Then you can identify price levels from which your preferred securities become interesting at a purchase or subsequent purchase.
3. Distribute your crash cash wisely
Nothing is more annoying than watching a stock market fall from the sidelines and not being able to invest because you have already used up all your powder. Try to avoid it!
As a general rule, only invest money in stocks and ETFs that you know you will definitely not need for the next five years. It is best if you only invest money in the stock market that you could even do without forever. Because you should not see your stocks and ETFs as part of your liquid assets, but as a share in a company.
You should use your available cash generously. Do not invest everything at once, invest in moderation, regularly and in a planned way. Not every stock crash ends as fast as the Corona crash. There have also been bear markets that have lasted for several years.
A long-term mindset, a powerful watch list and a smart financial plan: These are three of the most important ingredients needed to survive a stock market crash unscathed and even exploit it.
The most important resource is a large treasure chest full of experience. You may not have that yet as a new investor – but you will have it in no time if you follow the three tips above in any bear market.
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