The Benefits of a Falling Stock Market

While it is worrisome to see losses, there are those who get excited by the discounted stock prices. This coronavirus effect in the stock market has caused major losses. Perhaps, it is one of the most painful losses in years. With that said, there are opportunities hidden in many corners.

The losses are great and very painful from the outside but if time is on your side, the discounted stock market may provide great opportunities as well. This can impact your long-term goals and retirement in a good way.

In this time of great losses, make sure that you invest in blue chip companies. One will likely benefit from these great companies in the long run. I will not stop anyone from investing in high risk industries for as long as they know what they are doing. For the new investors, please invest with caution.

As prices go down, it is the best time to average down your investments. This means that we can all buy more of our currently owned shares at a lower price. If you bought a share for $50 before, you could buy more at $30-40 today. We are still at the early stage of the coronavirus crisis so there is still a great chance that we may see a further drop in the coming days. As of writing this blog, we are seeing more than 50% drop on oil companies and Canadian banks are now at 30%+ drop. Be cautious because it is still too early to buy, and a great drop might have to come yet. REITs have dropped roughly around 20-30% while some dropped less, and the rest dropped more.

Great Opportunity for New Investors

For the new investors out there who are holding cash, now is the chance to learn and watch the market. We are at the greatest drop in many years. We are seeing a set back of more than 10 years of gains.

Due to the coronavirus and oil market crash, we are seeing the market drop day by day and week by week. The buying opportunity is growing but also, there is a great problem as the economy begins dropping due to fear. The government may step in later to make sure the economy does not collapse. Make sure to buy good quality stocks from reliable companies with great business models because there is a risk that some businesses may not recover very well from this crash. The economy will not suffer for too long but when it recovers, gou're glad to have invested at a cheaper price.

Invest What You Can Afford

Investing is about having a balance of cash and investments. You don’t want to put all your cash in as it can put you at major risk from loss recovery. By having extra cash, one can average down on its long-term investments. This gives anyone the power to buy more when the price of their investment goes down. When you go to the superstore and see necessities go on sale, you buy them to save money. It is the same with the stock market.

Investing can be very risky so I will repeat what every single investor says before investing. “Do your own research.” As much as there is wealth, there are also great losses and you can see it this year and back in 2008.

The best advice from Warren Buffet is “Be fearful when others are greedy and greedy only when others are fearful.”

This is the rule of buying low and selling high. One must not buy into the market when it is going up and then sell because of bad news in the market. There can be negative news that impacts a market to go down and these are the times one can buy at a good price. A lawsuit and profit loss are examples of what can affect a company’s market share price to go down. When the company fixes their issues, by improving their business structure and relations, they can then recover, and this is good for investors as the stock price goes up.

Picking Companies

You want to pick companies that are good at fixing their problems and remain highly profitable. Taking the time to read and interact with other investors for wider database is very beneficial. While you can do your own research, having a few more heads will help anyone have access to weeks and even months worth of research from other people. Therefore, investor groups are all over Facebook so they can interact, have a conversation about an investment and even have a second opinion about their choices.

You work hard for your money so make sure that you invest carefully. Be ready to accept that you are wrong when you are wrong because if you don’t, you could end up losing your own money in the market. It is also always best to seek guidance from people who have the experience in the market and know what it is like to lose an investment but also know how to gain it back.

By having a conversation with others and reading into their own research, you can evaluate a company more by having greater knowledge regarding a company’s profitability and debts. Be careful because there are also people who tell you to buy while they are selling and tell you to sell when they are buying.

The very first thing you need is knowledge because without it, even when your goals are great, you may fall short on directions. The daily research and reading could take up to months or years before you become seasoned. Many investors who have been investing for years are still learning so do not be too quick at being too sure of yourself.

Volatility and Cautions

Market volatility is the value going up and down. Many can not handle the price of their investments going down so this triggers panic selling and often, this is how many lose their money. You need the nerves of steel and patience to go through such volatility. Investing is not for everyone and I do not want to encourage people to go head on without truly understanding the risks.

Having a cash balance is also important as it gives you room to find other opportunities and to adjust your portfolio. Investing is not about gaining tomorrow or next year. Investing is about making your long-term goal become achievable and the focus is to grow your income and save for retirement. Always look 10 to 20 years ahead.

We are now at the early coronavirus and oil bear market. Good luck to us all and may we prosper. Let’s keep focusing on our future and do not stress about today. For as long as we keep building our future, we will be okay.