Everyone Has Lost Money In This Economic Downturn
With the stock market going down so much over the last couple of years, many people have become gun-shy about buying stocks. This is understandable since most every stock had done nothing but go down for so long. However, there is signs of life and the market has moved back up somewhat.
Even though the market has made a small comeback, it does not guarantee that it will not start to head back down again. This is where you start to wonder whether you are missing out by not being in the market or whether this is just a false upward move before heading back down again. Professional investors have a slight advantage here because they are trained to understand market tendencies and to analyze the market.
Many people have thought about averaging down during this bear market, which just means they would buy more stock of what they already have but at lower prices. That would in effect lower the cost per share of the stocks they have but they would of course have more of them. This is a great thing to do if you can catch the market at the bottom but if the market has further to fall, then you just end up losing more money.
Although you may want to average down some of the stocks you own, it is important to get some much needed stock diversification as well. Any stock market expert will stress the importance of spreading out your risk between stocks and not putting too much in one stock or a group of stocks. When you put most of your money in one stock or one sector, it is more like gambling in that you are betting everything on one area. Good stock market investing entails figuring out a good variety of stocks that all have an above average chance of going up.
If this terrible market environment we have had now though, even those who were properly diversified have lost. Nothing can protect you from losing when the market goes down as much as it has and that is something you must be aware of and accept. Investing in stocks is risky and you should never invest money that you cannot afford to lose. Shortly though, it will be time to get back in the market and those that have strong stomachs will be the ones who stand to profit. - 23167
Even though the market has made a small comeback, it does not guarantee that it will not start to head back down again. This is where you start to wonder whether you are missing out by not being in the market or whether this is just a false upward move before heading back down again. Professional investors have a slight advantage here because they are trained to understand market tendencies and to analyze the market.
Many people have thought about averaging down during this bear market, which just means they would buy more stock of what they already have but at lower prices. That would in effect lower the cost per share of the stocks they have but they would of course have more of them. This is a great thing to do if you can catch the market at the bottom but if the market has further to fall, then you just end up losing more money.
Although you may want to average down some of the stocks you own, it is important to get some much needed stock diversification as well. Any stock market expert will stress the importance of spreading out your risk between stocks and not putting too much in one stock or a group of stocks. When you put most of your money in one stock or one sector, it is more like gambling in that you are betting everything on one area. Good stock market investing entails figuring out a good variety of stocks that all have an above average chance of going up.
If this terrible market environment we have had now though, even those who were properly diversified have lost. Nothing can protect you from losing when the market goes down as much as it has and that is something you must be aware of and accept. Investing in stocks is risky and you should never invest money that you cannot afford to lose. Shortly though, it will be time to get back in the market and those that have strong stomachs will be the ones who stand to profit. - 23167
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posted by X - Men @ 4:27 AM
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