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Navigating a Negative Market
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Josh (He/Him)
Financial Education Intern
Posted August 4, 2022
Have you checked your portfolio and been intimidated by the red numbers? It’s important to understand that while your portfolio is down, it doesn’t mean you’ve lost money. The only way you will lose money on your stocks is if you decide to sell them while the market is down. Just as the market can go down, it can also come back up.

Typically the average investor might panic after seeing a large deficit in their portfolio. The most important thing to do while investing is to have your emotions in check. Investing with emotions can become overwhelming and can result in major losses.

 There are options to minimize loss and make money while your portfolio is negative, which is what I’ll explain.

 There can be periods where a company has been on a downtrend for a large amount of time and it may seem as though there is no way the company will recover. The first thing you want to do is research any recent news regarding your investment and to analyze a chart, preferably the year time frame. If the fundamentals say that the company is in a bear market, then the best option may be to minimize any future loss and sell your stock.

While selling and minimizing your loss may be an unattractive option, another opportunity would be to option trade the opposite way of your investment to offset the loss you’re experiencing. Option trading is very risky and it is important to know what you’re doing before diving in. Option trading is an awesome option because you can make money on the downtrend while your portfolio is negative.

There is also the opportunity to sell your stock and place your funds into an ETF (exchange-traded fund) or mutual fund which is a safe space to shield your money during a bear market. While there may not be as much profit or loss, these are two safe options to store your money instead of withdrawing completely.

Lastly, if your finances allow you and you think the stock has potential to recover, then there is an opportunity to buy more stock at a discounted price. There is always an opportunity to grow even when your portfolio is down.
 
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