3 Costly Investing Mistakes You Should Avoid In A Bear Market
One advice veterans give to investors is to avoid checking their investments when the market is in rough territory.
avatar
Precious Njoku is a Financial Writer with extensive knowledge about the stock market.
2022-03-25 11:44

For much of 2022, there has been nothing but surprises and slumps in the market. At the start of the year, we saw tech stocks hit harder by the market slump than other sectors. Generally, stocks have been in correction territory for most of this year. A correction occurs at a 10-30 per cent stock selloff. This is a situation where sellers outnumber buyers. As a result, price takes a deep dive southwards from the law of demand and supply. Corrections can be prolonged or short-lived. It all depends on how the market and investors interpret events. 3 Costly Investing Mistakes You Should Avoid In A Bear Market
It would be best if you realized that corrections are regular events in the market. But it is sometimes scary for new investors, causing them to react from fear. In addition, some seasoned investors may have not had much time to handle market corrections in recent times, making them lack the necessary experience to deal with one.

I remember the scare due to Covid-19. It started a bear market, but it was short-lived. Since then, the market has been witnessing a rally. Here are some suggestions on what to avoid when in a bear market or correction.

Selling During A Correction
This is the number one mistake inexperienced investors make. Bouts of volatility make them panic, and they begin selling their stocks. If an investor gets out of the market when the going gets tough, it leads to missing golden opportunities. Historically, returns after a correction in stock markets are pretty good. On average, six months after a correction, the S&P 500 posts returns of 19.9% and 31.4% 12 months after that.

One advice veterans give to investors is to avoid checking their investments when the market is in rough territory. That takes the panicking out of the equation. That way, you would not be tempted to sell.

Refusing To Buy Stocks During A Correction
Remember the sage advice that good things happen in the depths? Market corrections make the average cost price of quality stocks come down. Therefore, they expose a lot of opportunities for quality stocks. In essence, you can buy more quality stocks during this period. During a downside, quality companies have limited downsides, and that is because their fundamentals are strong. So smart investors, rather than sell or keep off the market, look for such quality stocks and acquire more.

Also, note that corrections do not last a lifetime. Stocks recover from periods of corrections, and investors who buy at low prices will reap gains when they recover. So, investors with a long-term outlook profit from corrections due to their patience. This is the period to acquire more quality stocks and stay clear of those that do not have good fundamentals.

Switching to Riskier Investment Options During A Correction
Some investors would be inclined to diverge their portfolios of stocks during a downturn and switch to riskier assets like cryptocurrencies. They need to evaluate what motive is driving such a switch. If it is a fear of loss, they are panicking and might not make a good decision. Then, cryptocurrency would increase panic.

Investors who are not experienced with cryptocurrencies fail to see that they're more volatile than stocks. Also, cryptos are new investment mechanisms, and so very few of them have the staying power of stocks that have fundamentals backing them. Therefore, moving to cryptocurrencies might not make much sense, but having a long-term perspective on stocks would be better.

But if one wants to have a little bit of cryptocurrencies at this time just to mitigate the risks, that would not be a bad idea.


Disclaimer: I have no positions in any of the stocks mentioned. I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article. All information should be independently verified and should not be relied upon for purposes of transacting securities or other investments. See terms for more info.

Rate this article

positive
negative
Published On
2022-03-25 11:44

avatar
About the Author
Precious Njoku is a Financial Writer with extensive knowledge about the stock market.

buy-coffee
You've read 1 article in the last year
..thank you for supporting us and for visiting our site. Unlike many other sites, The Dog of Wall Street is available for everyone to read. Our focus is to provide great content for free. Do you like what we are doing? Buy us a cup coffee. It is the fuel that keeps us going..

Levi Strauss' Bold Gambit: Is the Denim Icon's DTC Shift Enough to Weather the Storm?
Levi Strauss & Co. boasts a strong quarter with direct-to-consumer growth and innovative fashion, but can it navigate the choppy waters of the retail market?
By Alfonso | 1 year ago

Amazon's Bold Counterattack: Introducing the China-Direct Discount Section
As competition heats up, Amazon unveils a daring new strategy to offer unbeatable prices and direct shipping from China.
By Alfonso | 1 year ago

Tesla's Legal Challenges: Facing the Music on Autopilot Misrepresentation
Court ruling intensifies scrutiny on Tesla's self-driving claims.
By Alfonso | 1 year ago

Netflix's Ad-Supported Triumph: A New Era in Streaming
Surpassing 40 million users, Netflix’s ad-supported plan redefines the streaming landscape.
By Alfonso | 1 year ago

Tesla Stock (TSLA): Look Who's Back!
I’m cautiously optimistic but I’m at the point where I need to see it to believe it.
By Mike Sakuraba | 1 year ago

2 Earnings To Pay Attention to Next Week
Since big tech is the theme, you probably know what I have my eyes on for next week.
By Mike Sakuraba | 1 year ago

2 Stocks to Watch Below $10
Here are two stocks that are currently less trading in the single digits that I believe have some relative upside from their current prices.
By Mike Sakuraba | 1 year ago

Looking Ahead to Tesla's Earnings: What Can We Expect?
Is there any stock that has been more talked about than Tesla (NASDAQ: TSLA) as of late? It’s a company that is always in the spotlight but the stock is under some heavy scrutiny this year and deservedly so.
By Mike Sakuraba | 1 year ago