During the COVID-19 pandemic which has affected economics across the world, several investors are anxious to know more details about the market and the future of their investment.
Following we have answered 5 most frequently asked questions by investors today;
1. Why did the market crash and when will it recover?
Since December 2019, a strain of coronavirus has affected the people of China and soon spread worldwide, globally infecting people rapidly. The only way to stop the spread seems to be social distancing. Many countries have decided to lockdown in order to reduce the community spread which has impacted almost every industry, hence the markets have incurred losses.
Predicting the recovery of the market is tough as we have not witnessed such a pandemic of this magnitude for decades. Having said that, we can say that if you are looking for long-term equity investments and them expect to grow in 5-7 years, then this is the right time for it.
2. Did I choose the wrong stocks? Why has my portfolio incurred losses?
This is one of the most common question people are asking as the majority of the investors have incurred losses due to the pandemic. This could also be good news for you as you are not alone here. More than 95% of stocks have become vulnerable to panic selling. It is good to go back and check your investment decisions but right now your choice of stocks is not the reason why your portfolio has witnessed loss. Investors who have a diversified portfolio are in a better position to recover their losses. The bottom line is unless you sell the stocks, there are high chances that the market will rebound and you will recover your investment along with interest.
3. Should I pull out my funds as the market crashes?
The market has always been a volatile place, and you should only invest if you have the appetite for long-term investment. If you do not have a longer horizon in mind, then probably you should look for different investment options. If you pull out during a market crash, you will incur a loss for sure. It is in your best interest that you do not react immediately but wait for the market to settle as the majority of the times it bounces back higher over time.
4. Should I buy stocks when the markets are low?
This is the best time to buy stocks, provided you invest in fundamentally strong companies. Just because the prices are low does not mean you invest, instead, do thorough market research or take the help of experts from AvaTrade which is an award-winning online broker company offering Contracts for Difference (CFDs) on Commodities, Stocks, Indices, Cryptocurrencies and more. View the AvaTrade is on Pinterest page for more information.
5. What is the biggest mistake that I should avoid during a market crash?
The biggest mistake you can avoid as an investor is to panic about any market crash news. The markets have always been volatile and fluctuate with time. Yes, the current pandemic has made the market furthermore volatile, but that is not a reason to panic. These are uncertain times that will pass. During any market crash scenario, investors should stick to their original plan rather than pull out of the investment, as there are chances that the market will come up. If you pull out your investment when there is a dip in the market, you will definitely lose money. Think long-term when you make such investments.
The Bottom Line:
If you are an equity investor, you should be prepared from sudden market volatility. It may seem catastrophic for a while but remember, most probably it will bounce back higher. If you are in for a long-haul investment, then this market is for you if not then you better look out for other options.