When it comes to trading stocks, things can be a little intimidating right now. Schaeffer’s Investment Research completely understands the reasoning behind this. With the pandemic raging on and protests dividing the country, on top of the usual ups and downs of businesses, who knows what is actually going on. Contrary to popular advice that says to stay put in a crazy market, Schaeffer’s Investment Research is looking into how individuals can take advantage of the current upheaval. In this article, we’ll go over some of Schaeffer’s Investment Research top tips on investing during unpredictable times.
1. Diversification is Key
Diversification is an excellent method by which you can mitigate risk. According to Schaeffer’s Investment Research, diversification can limit your exposure and can help you withstand market shocks. For example, had you been extremely bullish on airline stocks prior to the pandemic, your investments would have taken a nosedive. On the other hand, had you buffeted your airline stocks with some pharmaceutical companies, you wouldn’t have faced such a loss as those companies started to push higher with the news of several new vaccines. Schaeffer’s Investment Research‘s position is that every company as different and is like a double-edged sword. In order to blunt the effects of one of the edges, you should use the edge of another company that is doing well.
2. Take A Long Term View
Uncertain times don’t last forever. In 1918, the market self-corrected after the pandemic ended. It may have taken a few years, but it eventually came out of its funk. Schaeffer’s Investment Research predicts the same in this situation. That is why it is so important to take a longer-term approach when dealing with the market. While falling prices might indicate an immediate issue with the market and how investors currently feel, it can present an opportunity to the savvy trader. As Warren Buffet once said, “Be greedy fearful when others are greedy. Be greedy when others are fearful.” While the current pricing would suggest that you would lose money in the short term, holding on to a specific stock that you truly believe in could pay dividends when the market self corrects and the price picks back up in the future.
3. Don’t Stretch Yourself
Trading, by nature, is inherently stressful. Schaeffer’s Investment Research notes that people looking to invest should understand their tolerance for risk. While your time horizon may be better suited for risk, your psychology might not be on the same level. Schaeffer’s Investment Research believes that individuals should be comfortable with what they are doing in terms of trading first and foremost. If you are not comfortable with any trades you have made, this can have adverse effects on your psychology. What’s worse is that if you start seeing the result of this choice fail, it can play tricks on your mind. Schaeffer’s Investment Research advises people to speak with a professional who can determine their risk tolerance.
The stock market is inherently risky. The stock market during uncertain times, even riskier. By understanding who you are psychologically, taking a long term view, and diversifying, you can mitigate the problems typically associated with trading during unpredictable events.