How to Make Money in a Down-Turned Market: Don't Stop Investing

This article is part of a series of articles aimed to educate some of the ways to be profitable in a bear market. With the current economic recession, it may seem bleak, but there are still ways to profit!

Difficulty: Moderate

Instructions

1. In a downturned market, people often panic and halt their investments. However, this is usually not the best way to mitigate overall loss! Stopping your investments at a young age, especially retirement accounts, can be more devistating in the long run than the money saved in the immediate.

2. The market will eventually turn around. If you stop investing while stock prices are low, you won't be able to start buying again until the prices are much higher, which means you'll get less stock for your money. Wish you had bought Microsoft when it was $5 a share? The same thing will happen to some of the shares you are currently buying for fractions of their previous price. Think of the "Buy Low Sell High" motto... Right now share prices for most stocks are very, very low! You should be buying them because when they go back up they will be worth a lot more.

3. Continuing to buy a set dollar amount of shares on a regular basis is common in most 401(k) and other retirement programs. This is actually an investment strategy called dollar cost averaging, whether you know it or not. By purchasing using a set amount of money (rather than a set number of shares), you will be buying more shares when it's cheaper, and less shares when it is expensive. This means that you don't overextend yourself when the prices are high, and you will be taking advantage when prices are low. Dollar cost averaging has been used for many years as a way to lower the overall risk of any porfolio.

4. Especially for retirement accounts that are long until actual retirement age, the money you continue to invest now will be a large part of your nest egg because of the concept of compound interest. The sooner you start to invest, and the more you invest early, has a huge impact since the oldest money will earn the most interest. Stopping even a single $1,000 investment now could result in tens of thousands of dollars less by retirement age.

Resources

• How To Make Money in a Down-Turned Market: Start Here!
• How to Make Money in a Down-Turned Market: Short Sell Stocks
• How to Make Money in a Down-Turned Market: Invest in Other Assets
• How to Make Money in a Down-Turned Market: Temporarily Withdraw

[oterri]

on 12/29/2009 thanks! read, rated and recommended and hope you return the favor! Happy New Year!