When the market is low, fear is the natural instinct. Many investors either stop investing in stocks or sell their current holdings if they have dropped in value. However, as long as you have a sound long-term investment strategy, pulling your money out of stocks is seldom a good idea. In fact, when stock prices fall, it can be a good time to purchase more shares and "double down" on your usual contributions.
Even if aggregate stock prices fall in the short-term, stock prices will likely rise in the long term at a fairly predictable rate. If you purchase additional stock shares while prices are low, you will end up with even more shares when the market rebounds and prices rise again. When there is a dip in the stock market, you should think of stocks as being "on sale."
Of course, individual stocks are inherently more risky than index funds, which is why I recommend index investing (either through mutual funds or ETFs) if your aim is to achieve moderate and predictable long-term gains from your investments. While the market is low, double down on your Roth IRA or 401(k) contributions, and consider purchasing additional shares of your long-term stock investments.
Controlling your fear can be difficult, especially in a turbulent economy. But overcoming this fear to double-down on your investments while stock prices are low can be a savvy way to get ahead while others are panicking and selling off their under-priced investments.
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