Stock Market Crash or Dip?
Are we in a stock market crash or is it simply a pull back, a dip, an opportunity to buy your favorite stocks at a discount?
Recent pull back over pull back has brought the stock market to very low yet affordable prices. It all depends how you look at a pull back, some will see it as a time to freak out and sell but others will see it as an opportunity to buy the stocks at a discount from those who are freaking out and selling.
Nobody likes staying in the red for weeks or months, our brain is hardwired to see the profits flow and those numbers green.
We don't believe to be in a market crash, however there is something pretty weird and off-settling going on behind the curtains.
Some big tech companies are struggling to keep their stock prices high even though their profits are on point or higher, there has not been any major news affecting such companies and there is almost no reasonable argument for such a price drop in their stock quote.
Is it time to buy, sell or hold?
Our advice is pretty far fetched as to say it all depends on you. Without going into much details and complicated stuff, do companies you hold make you feel safe? Let's say you hold a few shares of Apple, who's stock has dropped quite a bit in the past few months, what are your thoughts on the company? Do you believe it will continue to grow or do you think Apple is overvalued and for one reason or another the company is doomed?
If you believe any companies you own are doomed then our advice would be to sell, since you don't believe in them.
However even when a company's stock quote is dropping in value, it is always a good idea to dissect such company to ensure no financial instability has pushed the company into the current state it holds. But usually, on a whole market pull back, some companies are very healthy, with a huge potential for growth, they are dropping in price, because that is the trend today. Hardly ever will one tech company go up while the rest tanks, usually they all move in the same direction and that is because of poor demand, investors afraid of a looming recession, war, etc.
In this case we would suggest you hold your current position in those companies and buy more as they continue to drop in value, lowering your overall cost per share.
How do you make money on a market crash?
The way to make money during a stock market crash is by taking risks, buying the dip, in this case keep buying the dip until stocks bounce back, since it'll be pretty hard to pin point the dip. Instead of dumping thousands of dollars into the market, buy a handful of shares as the stock goes lower, steadily growing your position. You must ensure you dissect and believe in the company you are investing.
Once stocks bounce back (could take years) you have taken a pretty large position at a bargain, therefore maximizing your profits when stocks bounce back and reach a new all time high.
There are other ways to make money on a stock market downturn and that is with stock options however good old fashioned buy low, sell high has worked for generations although risky it is not as risky as options trading.