When investing in shares, one of the scariest realities is that the market has its ups and downs. Sometimes the variations in share prices are minor, but there are low points where the market can dramatically decline and could cause global shareholder panic.
At AXIAM, we believe in long-term investing and don’t advise our clients to invest in shares with money that they will need in a year or two. This means that when markets decline, there is plenty of time for shares to stabilise and even increase, ensuring a profit from the initial investment.
Nevertheless, the taming emotional roller coaster we all experience when our investments devalue is a real challenge. Here are 5 things to do when this happens:
Keep calm
Remember that your AXIAM fund manager is experienced and understands that markets ebb and flow. The shares that we have jointly decided to purchase are the best long-term investment opportunities. Call your fund manager and have a conversation, he is there to guide you through the ups and downs.
Do not sell
The thought of losing money through your investment can easily create panic and cause you to make irrational and rushed decisions like selling your shares – don’t. Selling low is a common mistake when emotions take hold. At AXIAM, because we invest in global brands with strong histories, we have every confidence that if the shares decrease in price, the declines will be temporary as the underlying companies are as strong as ever.
Purchase stock
The best time to acquire new stock is during market declines. At AXIAM, one of our investment philosophies includes buying shares in global brands during market lows. Warren Buffett, known as the most successful investor of all time, is a firm believer in purchasing shares in solid global brands when they are under valued.
Expand your portfolio
Market declines highlight the need for portfolio diversification. You don’t want to invest all of your money in one place. If you spread your investments over a number of carefully selected and analyzed shares, you ultimately lower your risk. When one of your shares is declining, the other shares you own, could be climbing ensuring that your overall portfolio does well.
Profit from declines
Through the use of sophisticated investment instruments like futures and options, it is possible to profit from market down turns. These techniques are usually only available in hedge funds but are worth considering as part of a balanced portfolio.
While it is quite clear that nobody can truly predict when the market will decline, we do know that inevitably the market will once again stabilise, and strong global brands with history and heritage have always managed to reinvent themselves and continue to grow. If you would like to look at how you can grow your money over the long term, contact us and our fund manager will guide you through the process.