We all want to invest waiting when the market drop, but how do we know when it will crash?
We can’t know.
But above all if we met him what would we do?
Let’s assume the market collapses by 50% tomorrow.
Your investments are worth half.
How many would have the courage to double our investments because in this way we would have bought at a good price?
And if there was another 50% drop the next day, would we still continue to average buys down?
Probably not. Me neither.
I think the chart below is comprehensive enough on its own
Second problem to address: when is there a market crash?
10%, 20% or 30%?
the market enters bear mode when there is a 20% drop, but not all investors think the same.
Everyone has their own way of thinking about when a market drop should be entered.
How to fix the situation?
Create a strategy and stick to it.
Two examples if you have a capital accumulation plan could be:
- Stick to it no matter what. No matter how much the market loses, you always invest your amount (monthly, bimonthly, quarterly, ….) and close the app as soon as you have invested.
- Decide on a market drop rate and act accordingly. You could increase the amount that month to make up for the market drop.
Always remember to set yourself a limit. Don’t invest what you need to live. And above all prepare yourself psychologically.
We must always invest while waiting for a market drop and always have in mind how to behave accordingly.
Especially in favorable periods, we should understand how to behave, because after growth there is always a stop and a descent and we must not be scared or panicked.