The outbreak of the Corona Virus has not only an impact on our health but also on our financial situation. But how much will it affect the market and what are the consequences?
If you take a look how the stock market has acted the last months you can see an incredible increase of shares. Despite negative influences like trade wars, and the Brexit the markets maintained there high and even increased. Now the Corona Virus introduced a decrease in prices and it will be a big one. At first instance it’s just a market correction. Prices have been high, so a 10-20% decrease is very normal. Then there are the negative impacts on the market that have not been solved yet. Things like the Brexit and top politicians arguing have not finished.
The virus has started the downturn, but it isn’t the only factor that will pull the market down. Which in turn makes me believe that it will be a serious decrease. The first sellers are the ones who want to look in their earlier made profits and the second ones are the ones panic selling. After the market has dropped about 15 to 20% nearly everyone panics and get rid of their stocks. No matter if they made any profit or not.
The main purpose of the stock market is to make fools of as many men as possible. – Bernard Baruch
When you sell your stocks during a bear market you might be saving yourself from a decrease in stocks. But you will almost certainly also miss the biggest come back of the stocks. After the biggest decreases the biggest increases come up. If you sold your stocks it isn’t possible anymore to reduce the losses. Also one important thing to think about is how much of a cash buffer and time buffer do you have? If you will need the money very soon you might have made a mistake starting in the stock market. If you have more time you can just stay in the market get dividends and enjoy the increase later on.
It is hard on your finances and even more on your mind to see the money you have in the market decrease every day. You can take this time to get mentally stronger and to learn to sit through a difficult time. If you don’t need the money now you can remain and reap the benefits in the future. An important but difficult step to take is to consider if you are going to buy more during the correction/crash. To figure out if you want to do this you have to determine where you stand in life financially. If you need your money soon, then don’t even consider buying in. If you have money on the side and you don’t mind a temporary downturn consider buying more. The price of good and bad stocks all decreased now. So if there is a good company you always wanted to buy this might be the perfect time to go for it. However the thing you have to decide for yourself is if you are buying now or in a couple of weeks. No one knows how long the correction takes it may stay at 20% or go further to 50-70%.
No matter what you think you should do think twice before you take action or inaction. Selling stocks or buying stocks can both result in ultra good or ultra bad consequences during a bear market. Read articles, watch videos, ask friends and family, speak to multiple advisors. Don’t take a decision by just looking at one of them. Carefully consider all your options and try to make a good decision.