6 things you can do in a falling stock market

The market has been falling since January. And last Friday the PSE index closed at 7,063. While nobody can predict when the market will fall (and by how much), we all know that markets move up and down.

What goes up must also come down. The falling stock market cannot be avoided. But it should be seen as an opportunity to buy value stocks at a low price and then sell high in the future.

This current downtrend could be one of the major adjustments needed by the market to sustain its long-term bullish uptrend that began since 2008. Historically, the PSE index has been able to rise stronger, achieving new record highs every time a major market correction occurs.

The same thing happened in 2014 going into 2015, 2012 into 2013, and 2007 into 2008. And after each of these large one-way yearly upward movements, the PSEi went down.

So, what can we do in a falling stock market?

Do Nothing. For long-term investors, the best thing to do when the stock market falls is nothing. Don’t open your accounts. To avoid unnecessary worry and the temptation to sell off.

Resist any urge to sell stocks. Selling stocks in a panic is the worst thing you could do. The losses you see is just paper loss. Successful investing is about buying low and selling high. And if you think you can just cash out for now and wait until the market improves, consider this: You have no way of knowing when the market will swing back.

Unless you need cash immediately, do NOT sell off your stocks after a crash.

Buy stocks. You can average down or do cost averaging. If the stocks you currently hold are going red, then buy more, it’s cheaper! Also, take time to review your investments and make any adjustments to bring your asset allocation back into balance.

Make more money. You can’t control the market but you have a say in making money through other means. The best time to buy investments is when you have money to invest. You can’t sell since you will incur losses. But if you have more money, you can buy or add more to your current portfolio. And you are buying at a bargain!

Of course, this assumes that you monitor the risks and watch the fundamentals.

Diversify. Diversification is important for successful investing. It is also a good opportunity to add into index pooled funds. Such as mutual funds, exchange-traded funds, unit investment trust funds (or even VULs).

You can consider investing in other areas of engagement such as real estate, bonds, crowdfunding and so forth. Build that emergency funds. Get insurance (life, non-life, and health). And if you have a business, then put that extra money back into your business. As you have more control over that than the stock market.

Invest in yourself. If you have no money, you have time. How you utilize that time is up to you! You can learn from this market slowdown. You can educate yourself about personal finance and investments. Read a book, join free seminars and get a mentor.

The most important thing to keep in mind during a market slowdown is that it's normal for the stock market to have negative years—it's part of the business cycle.

On another note, I invest in my personal brand through content creation. We have a live stream this Saturday at 8pm: https://www.facebook.com/cebucontentcreators/

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