Are you facing trouble in finding yourself a good trading strategy in the Covid-19 pandemic? When it comes to any event not just with a pandemic, which may affect a country’s GDP then it’s always advised to buy on dips.
But most investors especially rookie fails to get a hold on the track of the market when it’s the best time to buy the stocks. It also haunts experience and well-known investors and is known as FOMO.
Fear of Missing Out (FOMO) is very real in our daily life and in current markets. As the market went down by more than 50% due to Covid-19 which troubled investors whether to buy this stock or another.
Learn Lessons From The Past Market Collapse Events
This collapsing of the market is not once in a lifetime opportunity, so don’t rush to invest. Since 1980 to 2020, the market has collapsed 5 times. It started in 1987, then in 1997-1998 due to the emerging market crisis followed by dot-com bust in 2001. Then in 2008-2009 hit by the global financial crisis and the most recent Covid-19 pandemic in 2019-present. So, if you pay close attention to then this happens once in every decade.
That doesn’t mean a collapse of the market does not create opportunity. It does, but we need to play smart and keep ourselves within our overall investment strategy. It’s not possible to wake up in one morning and decide to be a derivative trade by noon. This would result in becoming broke only.
Learn to Wait For The Right Opportunity
With my personal experience, I have seen people go Panic and sell in these kinds of market conditions. All these actions make traders realize the need of having a proper “Collapse Strategy” in market situations like this which keeps on hold until the next collapse of the market to put in use. Of course, you might be thinking now, it would be a very long time but as we all know, investing is all about patience.
What Should Be The Collapsing Strategy?
So, the collapse strategy is very simple i.e., whenever the market hits 20% down, just double your monthly purchase of Exchange Traded Funds (ETF). Just keep one thing in mind to buy the same ETF every month with a double amount. As markets would be cheaper and offering more ETF in less. So you can get more bang for your bucks. Just keep doing these double-sizing purchases until markets hit new highs once again, which will definitely take a couple of years. But if you have that much patience then the results would be worth it.
Some might think what if they run out of money to make double purchases. But most people have some overly chunky emergency fund through which you can take a limited amount of cash out. Or you can also save more by eating out less.
Note: If you can’t double your investment amount then keep investing the same amount you were putting in monthly ETF. It will also help you get more shares at the same price.