The Upside When The Market Drops

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There are upsides to market drops

Continual changes in the stock and bond market may be considered worrisome
but there is a positive to these ups and downs. If we were to have a stock and bond
market that remained steady and known, the opportunity to buy assets at lower prices
would not be available. The way you make money through appreciation of property is to
buy low and sell high. Having a chance to do this through a volatile market is a like
catching a rainbow on a cloudy day: it’s a bonus.

The knowledge that the price of a mutual fund, individual stock or bond changes
each day encourages investors to continually invest throughout the year. This increases
the probability you will be buying low on some purchases and on average you will
probably buy lower through a constant investing process, rather than choosing one time
of year to buy.

In addition to the advantages of continually investing, you create an investing
habit that serves you well as time moves forward and you have increased your assets
through the ups and downs of the market.

If you like a level ride and aren’t concerned about a greater growth in your
portfolio, you can choose a type of portfolio that doesn’t have a roller coaster ride but
has you ride on a level path. This level path has its own risks. You may be pleased with
an interest rate of 1% but if inflation is 3%, you would be losing money.
Your savings would buy much less than those of another person who earned over the
inflation rate during their investing journey.

There are many types of risks such as: interest rate, volatility, political,
environmental and inertia. Keeping your portfolio diversified will counter many of
these risks. While events in the universe and in the stock/bond market can affect your
portfolio, this does not usually happen to every aspect of your holdings at the same
time. Keeping that in mind can help you look at market drops as cloudy days with silver
linings.

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