These are the recommendations to follow if your investments fall Posted by Paola

Posted by NCCPL on March 11th, 2021

That an investment presents falls is always a possibility, especially when it comes to investments in the long term or with a high level of risk, where there is a greater probability that their value will grow but also decrease.

However, far from being scared if this happens to you, experts recommend not to be alarmed or less to make hasty decisions such as withdrawing your funds or changing your money from one financial tool to another.

What to do then?

1. The first thing is to keep calm

Not all investments work the same; Although some are riskier than others, they also have greater potential when it comes to reaching goals quickly, according to the OBS Business School blogNot, however, much as the market reacts to a violent event, it is very likely that the investment strategy had initially chosen not to change.

In this sense and especially if your investments were thought in the long term, in the face of a fall, it is best to do nothing, because surely and with the passage of time, these will be able to recover and even push your profits.

This behavior is explained by a fundamental aspect of the market: its dependence on infinite factors.

Therefore, when an unexpected event occurs, it is impossible to know what will happen to each of these related elements, so instead of being carried away by alarmist predictions, it is best to take advantage of the investment decisions that you have already made.

If you calm down and look around, you will realize that experts do not try to predict or profit from market movements, but rather suggest investors establish a diversified strategy, with well-defined investment risk and term, and that is also based on the purchase and sale of assets.

2. Know what the exceptions to the rule are

Although a fall in your investments can feel very bad, especially if you have just started your career in the financial market, you should not forget that every investment decision considers a percentage of risk, as well as probabilities associated with the period in which you leave rent your money (time factor).

In this sense, if you change your financial instrument at all times, your volatility will surely increase and your profitability will decrease. And, as a general rule, buying when an asset goes down and then selling it when it goes up is almost impossible to bear, unless you have inside information, which in turn is illegal.

For this reason, it is recommended to withdraw money from one instrument to another, only if the conditions of your investments change. In no other case of fall, because otherwise, you will lose the opportunity to rent to the maximum when, after all the decline, the expected rise arrives.

In fact, if you decide to withdraw resources from your investments because of the anxiety and discomfort generated by seeing that your investments are declining, all you are doing is breaking with your investment strategy. So avoid it and better be patient, wait for things to improve, and do not make short-term decisions, as recommended by the Financial Strategist portal.

3. Act accordingly

At this point, it is crucial that you remember what were the motivations behind your investment decisions so that the measures you take in the event of falls then faithfully correspond to this.

If you were adequately informed or advised by an expert, surely you evaluated your investments according to time and risk before disbursing your funds in one or another financial tool. It is also very likely that you have learned that it is not a good determination to be carried away by short-term fluctuations.

Well, in any situation of fall and only if it lasts longer than conventional, then the most advisable thing is to evaluate the conditions of each investment product you have and act accordingly.

For example, in the case of your pension funds and as time passes, you should switch to a less risky fund, because as your retirement date approaches, the investment term logically shortens (as well as its profitability ).

The same does not happen if you own shares in the stock market. Here and only when the market falls by around 25%, investors can act in three different ways, as stated on the site

  1. Exit the market and bet on a cash
  2. Increase investment
  3. Keep the investment

Being the first option one of the worst financial decisions that someone can make (empirically demonstrated with the example of the Great Depression), to increase the investment somewhat complete personal, and the alternative number 3 the one that generates better results in the long term.

In short, let the market do its thing.

This does not mean that you should stop worrying about your investments, especially if they show falls.

What it really means is that if you dedicated yourself to studying all your investment options before starting to invest, and also diversified your funds according to your possibilities to let them rent according to different risks and periods of time, the most beneficial thing then is to wait. for the market to do its thing.

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Joined: January 20th, 2021
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