3 things to do during a market downturn

The financial markets have been in a correction phase since the start of the year. Many of you are understandably jittery with the ongoing corrections. Market corrections are part and parcel of investing in the financial markets, but that does not stop fear and panic from setting in from time to time when investors are unsure what to do during a market downturn. So in this article, I outline 3 things I think you should do in an ongoing market correction.

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1. Stop looking at your portfolio 

Fear is very often the number 1 reason people do badly in investments. Panic selling is a very common phenomenon, where investors tend to sell when the markets are low which is the opposite of what you want to do. If looking at your portfolio in the red induces fear, one of the things you can do is to stop looking at the portfolio. If your investments are fundamentally sound, the markets will recover and your portfolio will likely be fine in the mid to long term. Stop looking at your portfolio for now and wait for the market recovery.

"Market corrections are very often good opportunities to accumulate more investments at attractive valuations"


2. Average down and buy more

Market corrections are very often good opportunities to accumulate more investments at attractive valuations. As Warren Buffett say "Be fearful when others are greedy, and greedy when others are fearful". If you are a long term value investor, market corrections are like the "Great Singapore Sale" where you can go hunting for good quality companies to buy at discounted prices. Have a longer time horizon to your investments and look beyond the short term market volatility. 

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3. Consult a professional

Investing can be simple yet challenging at the same time. Majority of retail investors tend to lose money in the financial markets, although not many like to admit it. Sound investing generally needs a good investment philosophy and mindset to bring you through the ups and downs of the financial markets in the mid to long term. If you feel that you are lost in this financial journey, one of the things that you can do is to consult a professional to review your portfolio. A qualified professional can likely bring a more holistic perspective to your portfolio and position your investments to weather the markets at a comfortable risk level.

Stay calm, stay safe. And keep investing. See you at the next article!

Written by: 

Royston Tan

The key to financial freedom is passive income. The goal is to live life on your terms.

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