The United States (along with the rest of the world) is in an economic downturn. Pretty much all stocks are down, way down. What to do if you’re in your twenties and just started investing?
First off, remember that you’re investing for the long-term future. The benefit about investing at our age is that we aren’t going to need the money in a year, we hopefully won’t need it for decades. The stock market will eventually be back up, and at the very least all you would need to do is wait.
Secondly, remember this is why you invested in primarily index funds (and if you didn’t, hopefully you’ll learn for the future). While your stocks are down (as the entire market is down) you won’t need to worry about the company you invested in declaring itself bankrupt.
Thirdly, look for the bottom. At some point, the stock market will start to recover. It may be in a few months, it may be a few years, but eventually that will happen. Around that point, is the perfect time to invest. It’ll average the cost of your stocks lower, and give you some great deals. Remember, you’re investing for the long-term future, a deal is a deal, don’t sell everything just because it’s going down.
What were the best instances to make money after economic downturns in the USA? Right after an economic decline. After the dot com burst, if you had invested in the 90’s you would have been able to sell for a significant profit in the past few years. Don’t forget the motto for investing. Buy low, sell high, and diversify and you’ll be just fine. I know it’s tempting to look at your portfolio, see it’s down 20% and freak out. Remember, until you sell it you haven’t lost anything yet. Take advantage of that most valuable resource that we possess –time– and wait it out.
Finally, if you do feel comfortable investing a set amount of money every month knowing it’ll leverage your costs down and that you don’t need the money anytime soon (and that you’re a cool enough investor not to sell when you see a loss), look to dividend stocks for individual investments and index funds.
Hope that helps, keep your heads up, it’ll all turn around eventually. I’m a firm believer that you learn a lot more from mistakes than success. This economic downturn hopefully reinforces the same points I’ve tried to make on this blog, and will help you carry them with you for the rest of your life. If you did make some significant mistakes, remember it’s better to lose a couple hundred dollars now (and report that as a loss on your taxes) than to lose thousands of dollars when investing later in life.
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