When Investing Goes Wrong

Investing, especially for beginners can be scary. You make your first trades and the stock market decides to push the big ole red sell button. You did nothing wrong, yet the markets don’t care about your feelings and you’re asking yourself if you made the wrong decision. What do you do? Do you sell? Buy more?

The famous investor Peter Lynch once said,

“Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, then has been lost in corrections themselves.”

It’s crazy because investing isn’t taught in schools and yet it’s become a mainstream topic over the past few years. Especially with cryptocurrency turning people into millionaires literally overnight.

So, when shit hits the fan you need to know how to respond rather than react in order to put yourself into a position to be successful. Here are a few ways to help you when things are looking gloomy for your investments.

1. Let the Markets Come to You.

Timing the stock market is extremely difficult and not something to rely on. Whether you’re thinking about investing $1,000 or $100,000, letting the markets come to you is a prudent way of easing yourself into the stock market. So before throwing all caution into the wind, you can always invest a portion of the money to start, see how it goes, and do a dollar cost averaging (link to dollar cost averaging strategy with the remaining funds.

I’ve enjoyed teaching people the 3,6,9 strategy, which is dollar cost averaging with purpose. You start with investing either 1/3, 1/6, or 1/9 of your money, and then depending on your emotions, you can invest the remaining portion how you see fit.

This allows you to take advantage of market changes while also keep you in the driver’s seat when it comes to making investment decisions.

2.    Utilize Automated Orders.

Since timing the markets is extremely difficult, using automation can definitely allow you to purchase investments at varying prices. You can utilize stop and limit orders to place below and above where current prices are. This will allow you to automatically capture the price as the markets move and allow you to make buys or sells without consistently watching the stock market.

For well established companies I typically put market orders 3-5% below and above the current market price to either buy or sell more of a position. This way I can readjust my strategy and take advantage of when the markets are moving whether positively or negatively.

3. Cash is a Position.

Despite interest rates being very low, cash is a position. If you look at any company’s balance sheet, you will typically see large cash positions. This allows you as an investor to always keep an eye out for new investments to purchase. Even though in the short run it may seem counterintuitive, patience is a virtue.

4. Utilize ETFs.

At times the stock positions you choose may have an off year and you may not capture the investment returns that you’re happy with. In order to avoid this feeling, you can utilize ETFs (Exchange Traded Funds) so that you can at least capture parts of the markets. This way you’re going to at least do as well as the markets and help alleviate any self-doubt you may in regards to the investments you’ve chosen to own.

5. Stay in the Game.

The longer you stay in the game, the higher likelihood you will have to become a success. In the present moment no matter what, things may seem scary. You make the right decisions, yet the world doesn’t seem to reward you. So, you need to make sure you tell yourself the reason you started investing in the first place.

Your Guide,

Joshua Krafchick, “Unconventional Money Guy”

Additional Reading about Investing:

1. Cryptocurrency: Future or Fad?

2. Which Money Mistakes Are Costing You

3. Who Wants to Be a Millionaire?

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