Wednesday May 25, 2022

Decrease in the value of your investments? Don’t panic

Anyone who invests in equity funds runs the risk of fluctuating the value of the investment. Fear and apprehension of financial loss often leads to investors withdrawing from their investment in times of decline. Let’s look at Mr. Peter’s example of how to behave as rationally as possible in times of market decline.

Petr wants to advise what to do in the current situation
Peter is 32 years old and works as a construction engineer. Two years ago, he invested his disputes in two equity funds. To each of them 100 thousand crowns. At the same time, he started investing in equity funds on a regular basis. He set the perpetual order to 1,500 K msn. Together with his financial advisor, he selected three equity funds and sent 500 K to each.

Petr invested a one-off investment for the purpose of long-term recovery, with an investment horizon of 5 and 10 years. He set up a regular investment at st. Now the stock market has landed and the value of Peter’s 200,000 investment is 161,000 K. Even the value of a regular investment is no longer Peter’s pension. Petr recently withdrew 300,000 K from the building society and would like to save and invest them.

He would not like to dispute his invested disputes. It appears that the markets could fall further. The size of whether it would not be better to invest the pension would rather choose not to go for money. According to him, I wonder what to do with a regular investment. Should it not take the order to cancel the investment? It makes sense to invest in it, what is the delay? And what to do with other free funds? Although he now doubts the suitability of investing in equity funds, on the other hand, he does not want to keep a pension on the current market with inflation of 3 and 4%. He would like to save his pension in such a way that he has 200 thousand crowns available within three years, the remaining 100 thousand crowns can be appreciated in the long run.

Hints and tips

  • In the event of a decline in investment, do not panic, do not withdraw from the investment.
  • Use the downturn for further investment.
  • Invest with an investment company with many years of experience.
  • If you do not speculate, do not have the original distribution of the portfolio, as long as you stick to the set investment horizon.
  • For equity funds, an investment horizon of at least five years is recommended.

Declines and lands are on the stock market nei
At a time when the price of the stock and the share certificate falls, it is advisable to invest. It’s the same as buying other products. When, for example, the TV is cheaper, we would rather buy it at a discount, rather than wait for it, not the price of the res.

Unfortunately, in the case of investments in securities, breeding is often irrational. Buy expensive and sell cheaply. In times of old soil, such as the current one, investors get the feeling that something is happening that has never been here and is unparalleled. When we look at the history of the stock market, we find that there has been a similar decline in the past.

Each of these crises was very specific and it must be admitted that even the current crisis is only from the previous ones. But it is not in comparison with them in any way. It is important that each decline was followed by strong growth and growth periods were always more than a period of decline.

For those who do not have available for investment in the current period during the period of decline and invests regularly in small stakes, the period of decline is especially suitable. Such a hunter should ask that the period of decline lasts as long as possible. The decrease will last according to the fact that more cheap share certificates are bought and the darker volume of the investment will increase to the values ​​after the subsequent growth.

Investing in equity funds is not suitable for anyone. Those who prefer peace and security to the potential of above-average appreciation and that the declines in the market will be mentally dangerous, should prefer to choose conservative forms of investment.

Only those who are willing to take the risk of collapse, are patient and adhere to the set investment horizon, can evaluate their disputes over time. Upon adherence to the 5 and 10 year investment horizon, the probability of an appreciation at a rate of 10% is high.

I definitely do not recommend withdrawing from the investment and sell the purchased share sheets. The investor issued and delayed the investment and at the moment when he withdrew from the investment. Until then, not so much, its length and length are virtual. In Petrov’s case, a loss would be realized when selling catch sheets at the current price.

The best one will be patiently waiting for the market to turn to a growth trend. Petr should be able to appreciate the original measure of long-term pension, in the horizon of less than five years. Speculation of the type is not suitable either: I will choose these pensions, and and the markets will go up, I will invest them again. Would we do it for? We can keep the furnace straight into the investment and keep growing. In this operation, we would only re-pay the entry fees, which we paid once.

If Petr has invested in funds that are among the best in his categories, it is not good to transfer investments to other funds. At a time when the world is highly globalized, growth and market downturns are affecting most regions and industries. Therefore, I would not rely too much on the fact that another fund will make losses significantly faster. In addition, Petr would pay the entrance fees.

As for regular investments, I would not be afraid here and the decline was particularly positive. A regular investment advantage is that we buy share certificates at different prices, both during periods of decline and during periods of growth. Let’s spread the risk and get the average return over a long time horizon. In times of decline, the average purchase price of a share certificate decreases, which plays a great advantage. Therefore, we should force the price drop to buy, with regular investment, and on the contrary, we want this to last as long as possible for us for a suitable period.

Let’s invest the free funds partly in bond funds, partly in equity funds. The first 200 thousand crowns, which Petr needs to be available more quickly, can be invested in bond funds. Bond funds are conservative investments with currency fluctuations. At the third horizon, I expect an appreciation of 5% ron. Petr has access to pensions at any time, but only if the recommended horizon is met, he will most likely reach an evaluation.

If Petr is strongly affected by the bad mood on the stock markets and lost in the stock markets of the yard, then the option of investing the remaining 100 thousand crowns in bond funds is offered. But if Petr is patient, he is willing to take the risk of fluctuating value of the investment and to observe the set investment horizon, it is possible to impose a suitable period and buy shares of equity funds. But how do we know that the market will not decline? It is very difficult to hit the bottom of the stock market, it is not worth trying.

Even if there is a further decline, buy Petr at the lowest prices in the last few years. But to spread the risk, I invest in two waves. Send the first 50 thousand crowns immediately and wait for the next 50 thousand. Let’s see how the situation on the market develops, and you can buy a cheaper ride for the city.

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