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5 Things To Do When the Market is Red

5 Things To Do When the Market is Red

We always want the bull to be the star, but truth is, there will surely be times when the bear has to come out and shine. Photo credits to source.

Rant. Scream. Binge. Get drunk. Go insane.
Nope. That’s not the 5 things to do when the market is red.
Or maybe you’ve passed through that stage and you need some more intellectual things to do than those.

It’s not easy to lose money even if it’s paper gains – simply because we work hard surely aimed to get the best returns that is why we invested in stocks to begin with. Reality is, (please take time to read my recent stock diary) stock market may offer you huge possible returns, but it can also give you your biggest financial journey heartbreak.

Here are 5 things you can do when the market is red:

1 Protect your cash. Stay on the sidelines.

Some people fall into the dangerous trap of averaging down further. While I will oppose this when we get to #2, averaging down (as mentioned in the recent stock diary) is like a double-edge sword – make it or break it. You might be averaging down on the wrong pick. You might be averaging down without any plan at all.

Best to protect cash such that you don’t continue to catch falling knives (phrase used to define stocks whose prices plummeted and worse, hit rock bottom) and see your hands bleeding in pain. Your portfolio in deep losses. You don’t need to buy all these stocks and exhaust all your cash – you can wait for the time when global uncertainties are winding down.

2 Buy on dips. 

Is #1 totally contradictory to this? Yes, it is. But for long-term investors, you see their butts on the edge of the chair as they rejoice over this shopping spree. For some, this is a healthy correction, a great time to buy. In an article by Bloomberg entitled “Philippine Stocks Cheapest Since 2011 as Growth Belies Rout” last June 19, 2013 Allan Yu of Metrobank said: “The fundamentals haven’t changed. The economy is still on a strong growth trajectory.” Marvin Fausto of BDO said: “This correction has opened a very good opportunity. The idea is to keep buying on this weakness.”

These fund managers are affirming that this period may be a good entry even. As we have shared in previous articles here in the blog, the Philippines is a different story – it is driven by local consumption, overseas remittances are strong, and you have a young professional population driving demand.

Some of us may have been too attached now with the market. That even while we sleep, while we are sick, or in our dreams, we think of it – we just love and hate it. Photo credit to source.

3 Assess your portfolio’s performance. Assess yourself too.

This is the time when you hear people say: “Asan na ang mga gurus?” Or some blaming their stock newsletter providers. Some shouting out their emotions in Facebook and stock market forum. Some people have become emotionally attached to the market. Some are addicted they are excited about this great buying opportunity. This is the time when the feeling is heavy everytime you login and see a negative, in flashy red color glaring at you. It’s time when people get confused – did I make the right decision? Am I doing the right thing? Am I better off with mutual funds with a fund manager handling my money instead? Is stocks for me?

This is the best time for you to take a step back and check out how your portfolio has performed.
Here are 15 questions you might want to answer in your assessment:

  • How much have you gained so far?
  • How much have you lost so far?
  • What are the successful/unsuccessful trades?
  • Should you set a cut loss price moving forward?
  • Should you add more funds?
  • Should you learn more from books and resources?
  • Should you just withdraw your holdings and move on?
  • Are you changing strategies?
  • Are you changing your investment horizon from short-term to long-term and vice-versa?
  • Is’t time to cut losses or hold on?
  • Was I impulsive in my buy and sell?
  • Can I control my emotions in this kind of investment?
  • How do I behave when the market is green? How about when it is red?
  • Are you making money?
  • What is my purpose why I am investing in stocks?

Take this time to answer in all truthfulness. It will benefit you and your future.

Fear of the pain blinds us to the goal of healing. Only by seeing our problems clearly and experiencing them can we do something about them. — Bob Hoffman

4 Diversify. What are your money machines aside from stocks?

According to the Bible:

“Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.” Ecclesiastes 11:2

I have just received an inspiring from a reader via email and I am truly wowed by the story of Ms. Marie. If only you could read her story, she’s got a number of money machines I am humbled to read her sharing. In years’ time, I know she will live a comfortable (or maybe she is right now living it!) with her family given that she has provided the necessary financial cushions to whatever life has to bring – whether it be emergency needs, future education for the kids or for themselves.
If this is your first time to experience a red market in this crazy world of stocks, don’t fret. You can learn so much from this period and discover other money machines such as business, real estate, forex, online media and others. For newbies – it’s not the end of the world. Diversify!

5 Enjoy life! Count the blessings. Share the blessings.

Oh, I love this part.
Money is nothing; it’s what you do with money.
Until you get this point, you’ll never understand the true wealth behind financial freedom.
It is the joy to enjoy life.
To buy experience.
To be happy with your family, to hug them, to kiss them and tell them how much you love them so much.
To spend time on vacations, enjoying yourself, the beauty of nature, the relaxing massage, the zen under the stars..
To buy the gadget you’ve always dreamed of.
To date your special someone, your wife or husband, your kids, your lovely cat or loyal dog.
To catch up with good old friends.
To share your blessings with those in need. (We have a charity activity coming up next Saturday, June 29, 2013)
To spend precious time with the Lord..
To strike through the items in your bucket list and add some more til you hit 30.
There’s just so much more in life.
It’s the best time to thank the Great Guy above for all the blessings.
That you are fully alive and you can live a charged life not just in investing in stocks but being more, being exceptional, being the best you are.

Money is only a tool. It will take you wherever you wish, but it will not replace you as the driver.
Ayn Rand

Money is good for nothing unless you know the value of it by experience.
P.T Barnum

 

It’s good to have money and the things that money can buy, but it’s good, too, to check up once in a while and make sure that you haven’t lost the things that money can’t buy.
George Lorimer

This article is dedicated to my wonderful reader Ms. Marie and to all other readers out there who believe in me. Thank you so much for all the support! I pray that God bless us and our finances a million-fold.

Every Filipino deserves to be financially free.

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