Investors Mistakes When Market is Down

•  Shai.Gal

•  Oct 23 2022
 

The high volatility recorded in the financial markets since the beginning of the year and the continuous decline in the stock, bond and foreign exchange markets marks the end of the era of expansionary monetary policy

Here are the 5 common mistakes that investors make and should be avoided:

1. Invest the entire investment amount at the very beginning

It is worth investing in portions, thus reducing the risk and allowing yourself to purchase goods on days of sharp declines. The desire to make a profit drives investors to buy stocks just because they go up every day, even for no reason. A stock that has a buzz around it and is grabbing the headlines - this is exactly the moment to sell. Remember - once the correction in the stock starts, no one will take care of ringing the bell for you.

2. Sell fast your profit stocks, and get stuck with losing stocks

Investors are afraid to admit a mistake and stay too long with a losing stock, even though the company's business has deteriorated. On the other hand, they rush to sell stocks that brought them profits, even though their business is only getting better.

3. Sell your winning stocks first

During periods of falls in the markets, there are investors who tend to realize the good stocks and stay with the losing ones. This strategy often turns out to be wrong. When the markets climb back up, it will usually be the good stocks that recoup most of the declines, and the worst ones will continue to lag behind.

4. Increase holdings in a losing stock

Investors tend to base their purchase on falling stocks. That is, to buy an additional amount of the stock that is causing them heavy losses, believing that they are lowering the average purchase price and the stock will go back up. Try to stop this because you are only increasing the risk of a larger investment.

5. Sell in a panic

In a period of sharp declines, you have to think before you run to sell, when usually the most profitable advice is to wait until the rage passes. What has characterized trading in recent years has been Buy The Dip assuming the Fed is behind the market. But now inflation is at the forefront of his mind, and the market is wondering when interest rate hikes will stop, if only to test the impact on the economy. In the meantime, the members of the Fed continue to express themselves in a hawkish and determined manner to lower inflation towards 2%, and the interest rate hikes that are so bad for the market are expected to continue.

Please note that the article should not be considered as investment advice or marketing, and it does not take into account the personal data and requirements of any individual. It is not a substitute for the reader's own judgment, and it should not be considered as advice or recommendation for buying or selling any securities or financial products.

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