When investing your hard earned money, you should be confident that you’re making the most out of your investment opportunities. That means making the right decisions at the right time, especially when it comes to being prepared for the next market correction. A correction, or downturn, is different than the more common ebb and flow of the stock market. It occurs when there’s a price decline of at least 10% of any security or market index from its recent high.
Although it’s impossible to predict exactly when the correction will occur, how long it will last, (the most recent correction lasted from Summer of 2015 to February of 2016), or how bad it will be, many financial experts agree that the market will take a turn for the worse sometime in 2019, with loss percentages somewhere between 10 and 20%. Scott Minerd, Global Chief Investment Officer and Chairman of Investments for Guggenheim Partners, commented in a recent article for Business Insider, “The markets are potentially on a collision course for disaster. Strong fiscal stimulus at the end of this business cycle, at a time when the economy is already at so-called full employment, is likely to force the Federal Reserve to step in and be more aggressive with interest rate hikes to try to keep inflation in check.” Additionally, there is more volatility being seen in the market due to investors becoming risk averse.
No matter how severe the correction turns out to be, you should prepare now in order to avoid loss and make the most of your returns when the market shifts. Here is what you can do to prepare:
Stay Calm and Tune Out the Noise
While declining markets can cause fear and anxiety, it’s important to remain calm. Constantly checking financial news reports on TV or online and listening to overly dramatic negative nellies won’t do you any favors. Instead, practice patience and mindfulness. Both will reduce stress and keep you from making hasty and emotionally-charged financial decisions, in other words bad ones.
Evaluate Your Current Investments and Strategy
- Why are you investing in the place?
- Are you in it for the short term or for the long haul?
- Are you getting the return needed?
- Are certain assets performing the way you intended? If not, weed them out of your plan.
- Does your strategy continue to reflect your investment horizon, current financial situation, and risk tolerance?
- What are your options when the market shifts?
Have a Trusted Financial Advisor
Seeking the advice of a trusted financial advisor can help you navigate the rough waters of a market decline. He or she will also make sure that you stay on track to meet your goals. Work with your advisor to keep a list of stocks or funds you may want to buy. During a downturn, it’s a great opportunity to add them to your long-term investing and at a great price, while others are frantically selling.
You should also take a look at your portfolio and make sure you aren’t too heavily invested in any particular areas. Keeping a well-diversified portfolio and limiting your risk will keep you stable when the market shifts. You wouldn’t put all your eggs in one basket and that goes the same for your portfolio.
Look at “Recession-Proof” Investment Options
Certain categories of investments offer stability, dependability, and deliver no matter what the financial weather. These recession resistant options include such necessity-based sectors as healthcare, food and beverage, and real estate.
Want to Take Advantage of the Next Market Correction?
Learn how you can not only defend your wealth, but actually take advantage of the next market correction in our free on-demand webinar “How to Invest for the Next Market Correction.” Don Wenner, CEO of DLP Capital Partners, will explain how investment opportunities with DLP Capital Partners, specifically in Class B multifamily real estate, will thrive during a downturn and how we are strongly positioned to protect (and grow) the wealth of our investors through unstable times.