DOES IT MAKE SENSE TO KEEP INVESTING AFTER THE MARKET CRASHES? | ANSPL SHARES

We often think does it make sense to keep investing in the market even after it crashes?

Want to know??

Well, we often think it makes no sense to keep investing in the market after it crashes but we go wrong with this judgment. Reports suggest that after every crash investors who kept investing more benefitted after the markets stabilized. 

What are market crashes? 

A market crash is a sudden downfall in the prices of stocks across a major part of a stock market which leads to a huge loss of paper wealth. 

A social media crash generally occurs when:

1. There is a prolonged period of increasing stock prices which is called a bull market
2. Wars 
3. Large corporate hacks 
4. Natural disasters 

HISTORY OF CRASHES 

1. The market crash of 1929 

This stock market crash is the worst in history which started in 1929 and was one of the reasons of the Great Depression. The primary reason for the stock market crash was excessive leverage. Investors had started buying stocks on margin loans and paid only 10% which further burst the debt bubble and led to the biggest crash in history. 

2. Black Monday of 1987

Black Monday happened on October 19, 1987, on which the Dow Jones industrial average declined by approximately 22%. 

Black Monday counts as the most decline in a single day in the stock market history. 

This stock market crash by programmatic trading and was not an economic problem hence it was recovered very quickly 

3. The market crash of 200

This stock market crash of 2008 happened on 29th September 2008. 

The main reason for the crash was that congress rejected the idea of the emergency economic stabilization act 2008.

4. 2020 covid 19 crash 

This is the most recent stock market crash which occurred in February. 

Reports suggest that the Dow Jones declined 11% And 12% respectively recording to be the biggest weekly declines since 2008. 

However, unlike other crashes the stock market recovered by May 2020.

Market crashes often insert feelings of anxiety and fear in investors which leads to them selling their shares but it becomes misleading and that leads to selling shares at low rates and missing on future increases In prices.

Investors who want to keep investing in the long run and survive the downfall of the markets should prefer investing in high-profile companies with good financial status because history suggests that these companies stand strong in the long run and are more beneficial for investors’ portfolios

One should be cautious while investing during the crash investors shouldn’t be in speculative stocks, or high-debt stocks and should go through the financial ratios of the company and prefer analyzing the financial statements of the company because in the stock market it is said that history repeats itself.

Let’s look over the reasons why you should keep investing even when there is a market crash:

• Descends are always followed by  ascends

Investors often think that due to the downfall in markets they will lose more money however if they are patient and wait prices do eventually increase.

Investors will face more loss if they’ll rather sell their shares when the market is down, in fact, there is a chance that their portfolio will gain more value than they had before the descent. 

It is difficult to stand up against the decline in the prices and not pull out, but research shows that the avg duration of a bear market is around one year in comparison with a bull market which is approximately 4 years. 

The average gain of a bull market can be approximately 116% whereas the average downfall of a bear market is 30%

The main thing to keep in mind is that a bear market is short-term where as a bull market erases the decline and increases the gains of a previous bull market. 

One pitfall for investors is missing out on the major upturns in the market to come. 

Downfalls and up-falls are bound to happen in the market and no one can predict what is going to happen.

• Stay invested in the long run 

Long-term investors who have been investing for over 20-30 years the ones who keep investing even when the market is down will tend to see a smaller pessimistic effect on their portfolios than investors who tend to sell their shares during the downfall and reinvest later.

 Market crashes that happened in 2008 and 2016 were repulsive, nevertheless what’s important is to keep investing regardless of the market situation and stay true to your investment plans and strategies.

Focusing on long-term investment doesn’t let you focus on emotions such as fear anxiety and greed if you keep investing a small amount every month you’ll see a huge increase in your portfolio. 

• You can’t predict the market 

Predicting the market is extremely difficult even for those who have been investing for a long time. Investors who take part in market timing often miss one of the best days of the market.

According to history, six of the ten best days of the market befell during two week of ten worst days. 

Therefore instead of predicting the market and then investing, keep investing regardless. 

IN A NUTSHELL 

Being patient and disciplined while sticking to your investment strategy is essentially important in managing a successful portfolio. 

If you have a long-term investment plan you’ll not want to follow the panicking mode and give in and sell the shares. 

Instead of fearing the market crash and selling your shares use the bear market as an opportunity to buy more shares. 

Buy more shares at huge discounts and allow yourself to expand.