The one piece of advice that each and every investor ought to heed
Do not make any investments until you have answers to the following questions.
“Which type of investor are you? ” Do you have sufficient funds? Are you a risk-taker when it comes to investing? How much risk do you want to take?”
In other words, become familiar with yourself.
It’s possible that this is the aspect of buying and selling shares that gets the least attention.
Your answer to the question “How much am I willing to lose?” should always be your first consideration when deciding “what” to buy.
Because, whether you choose to believe it or not, that is the key to successful investing. Having the awareness to know when to leave.
How much cash do you feel comfortable gambling away?
When the market crashes, there is one thing that nobody ever tells you, and that is that you should always be prepared to lose money.
When the stock markets go down, it is common knowledge that wealth will go down with them. Every every flash of red that you see on trading screens indicates that someone is losing money. However, the majority of investors don’t believe that something like this could ever happen to them.
For far too long, investors have been told that they should acquire shares with the intention of holding onto them for the “long haul.” Or they can construct a portfolio that allows them to “set and forget” their investments.
In that case, you should know that doing so could very well be the quickest way to lose money in a market crisis.
The good news is that you have control over how much weight you lose.
The first step involves the client’s mental state.
Investors have to come to terms with the fact that they will suffer financial losses. But there are ways to lessen its impact.
There is no purpose in keeping track of the daily fluctuations in share prices that eat away at your portfolio. Therefore, before making any investment in stocks, it is important to determine a stop loss and then adhere to it.
People tend to underestimate the extent of the damage caused to blue-chip stocks during market crashes. Therefore, it is important for investors to implement stringent stop-loss orders while trading blue chips.
On the other hand, there is a silver lining to this cloud: If investors can sell their shares at a small loss, they will still have some cash remaining.
After all, not every stock goes down at the same time. You can uncover stocks that are increasing in value even when the market as a whole is declining.
One more perspective on the matter is as follows: You need to have an exit strategy worked out before you ever consider purchasing any shares.
Ask yourself: if the market were to crash right now, what would be the absolute lowest price that I would be willing to sell them for? After you have provided a response to this question, you are able to proceed with the purchase.
