Why stock market is down today

Long-term investors know that the market and economy will recover eventually, and investors should be positioned for such a rebound. During the financial crisis, the market plummeted , and many investors sold off their holdings. However, the market bottomed in March and eventually rose to its former levels and well beyond. Panic sellers may have missed out on the market rise, while long-term investors who remained in the market eventually recovered and fared better over the years.

The index not only rebounded swiftly from those lows but has also hit record highs several times since. Instead of panicking and locking in your losses by selling at the lows during a steep market correction, formulate a bear market strategy to protect your portfolio at such times. Here are three steps you can take to make sure that you do not commit the No.

Investors can probably remember their first experience with a market downturn. For inexperienced investors, a rapid decline in the value of their portfolios is unsettling, to say the least. That is why it is very important to understand your risk tolerance beforehand, when you are in the process of setting up your portfolio, and not when the market is in the throes of a sell-off. Your risk tolerance depends on a number of factors, such as your investing time horizon, cash requirements, and emotional response to losses.

It is generally assessed through your responses to a questionnaire; many investment websites have free online questionnaires that can give you an idea of your risk tolerance. One way to understand your reaction to market losses is by experimenting with a stock market simulator before actually investing.

This will enable you to assess your own particular tolerance for risk. Your investing time horizon is an important factor in determining your risk tolerance. For instance, a retiree or someone nearing retirement would likely want to preserve savings and generate income in retirement. Such investors might invest in low-volatility stocks or a portfolio of bonds and other fixed-income instruments. However, younger investors might invest for long-term growth because they have many years to make up for any losses due to bear markets.

To invest with a clear mind, you must grasp how the stock market works. This permits you to analyze unexpected downturns and decide whether you should sell or buy more. Ultimately, you should be ready for the worst and have a solid strategy in place to hedge against your losses. Investing exclusively in stocks may cause you to lose a significant amount of money if the market crashes. To hedge against losses, investors strategically make other investments to spread out their exposure and reduce their risk.

Of course, by reducing risk, you face the risk-return tradeoff , in which the reduction in risk also reduces potential profits. Downside risk can be hedged to quite an extent by diversifying your portfolio and using alternative investments such as real estate that may have a low correlation to equities. Having a percentage of your portfolio spread among stocks, bonds, cash, and alternative assets is the essence of diversification.

A well-executed asset allocation strategy will allow you to avoid the potential pitfalls of placing all your eggs in one basket. Reams of research prove that though stock market returns can be quite volatile in the short term, stocks outperform almost every other asset class over the long term.

Over a sufficiently lengthy period, even the biggest drops look like mere blips in the market's long-term upward trend. This point needs to be borne in mind especially during volatile periods when the market is in a substantial decline. Having a long-term focus will also enable you to perceive a big market drop as an opportunity to build wealth by adding to your holdings, rather than as a threat that will wipe out your hard-earned savings.

During major bear markets, investors sell stocks indiscriminately regardless of their quality, presenting an opportunity to pick up select blue-chips at attractive prices and valuations. If you're concerned that this approach may be tantamount to market timing , consider dollar-cost averaging. With dollar-cost averaging, your cost of owning a particular investment or asset—such as an index ETF —is averaged out by purchasing the same dollar amount of the investment at periodic intervals.

Because these periodic purchases will be made systematically as the asset's price fluctuates over time, the end result may be a lower average cost for the investment. Investing in the stock market at predetermined intervals, such as with every paycheck, helps capitalize on an investing strategy called dollar-cost averaging.

With dollar-cost averaging, your cost of owning a particular investment is averaged out by purchasing the same dollar amount at periodic intervals, which may result in a lower average cost for the investment. This "market timing" strategy might sound easy in theory but is extremely difficult to execute in practice because you need to get the timing right on two decisions—selling, and then buying back your positions.

By selling all your positions and going to cash, you risk leaving money on the table if you sell too early. As for getting back into the market, the bottoming-out process for stocks typically takes place amid a plethora of negative headlines, which may lead to second-guessing your own decision to buy.

As a result, you might wait too long to get back into the market, by which time it may have already advanced considerably. Rising Falling active stocks After-hours winners, losers Premarket Stock screener.

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Set refresh rate to: Refresh Now 40 Seconds 1 minute 2 minutes 3 minutes Stop auto refresh. From Date To Date Go. Here's how to invest like a pro Nov 14, , However, now that the market has witnessed a stellar rally, many investors are wondering how they should position themselves for the future.

IPOs, new listings and inflation data among key factors to drive market this week Nov 14, , All three companies will be listed on Monday. Stocks may see more green next week as risk appetite recovers Nov 12, , Much of those gains in the market this week came today as the headline indices closed over 1 per cent higher driven by short covering.

Dalal Street bulls rejoice as bears hammered by short squeeze Nov 12, , About Sensex The Sensex, also known as the sensitivity index, is the benchmark index of BSE Limited and is the most widely tracked equity gauge in India. Browse Companies:. Enter a name for your WatchList.