Do you need me to remind you of something in this stock market business? Yes, you do… DON’T PANIC. I really felt like I needed to remind you of that because emotions seem to be running high at this point in time. People are panic about selling their great positions in the fear that it may get worse than it already is. In one of my blogs, I reminded you that investing in the stock market is a long-term plan, so why is there panic because of these short-term fluctuations? I do not see any reason to panic because as a long-term investor, you should not be bothered about what is happening right now.
Now, I am not saying panicking is a bad thing, especially considering how the stocks have crashed and are still crashing. I am only trying to act as that reminder that there is absolutely no need to panic. First, I believe the market crash of this year cannot get any worse than it already is. I also think the market is due for a correction. In fact, we are long overdue. The market and investors really need a breather at this point in time. I really think I am making this blog to prepare you for what may be an inevitable pull-back in the market. The earlier you know of this, the better you start preparing yourself. Also, early knowledge will be sure to prevent you from making any moves due to panic or fear of how the stock market is turning out.
Hello readers, my name is Antoaneta, and I am glad to be here once again. Like my other contents, this is going to be just as exciting. I have a channel on YouTube that contains content relating to health and financial freedom. There are also contents related to this video. So, after knowing all these, the question is, wouldn’t you want to subscribe to my channel? I also have a rapidly growing Facebook community which you can join by simply joining my Facebook page. By doing that, you will have unlimited information about whatever is going on. Check out my other blogs such as, “7 Steps To Find An Outstanding Stock Quickly“.
What Causes Stock Prices to Change
Now, to the topic at hand. Let us look at these three top indexes: DJIA, S&P, and NASDAQ. In a single day, DJIA went up by over 0.09%, the S&P went down by about 0.78%, and the NASDAQ went down by about 2.46%. So, what this means is that the speculative or high-growth investor must have seen that time as a very bad time for them in the market. However, a dividend and conservative investor would have seen a very good time. There are a lot of things going on behind the scenes in the market, so as a high-growth investor, you have to be ready for one thing, the high volatility of the market.
Well, I want to share my ideas with you as to what I believe is going on here. First, why was the DJIA green at this time? Well, DJIA is made up of many stocks and the general performances of these stocks determine how well DJIA will do. So, the stocks that did well outweighed the ones that did not do well, and that is why the DJIA is green in the meantime. The S&P index is also made up of different companies, and the case is the same. But for the S&P, the companies in financials were trying to pull the index to the green side, but the tech companies were weighing more to the red side, so we ended up with red. Finally, the NASDAQ took the biggest hit that fateful day. Most of the companies that made up the NASDAQ index were tech stocks and other stocks that took quite a hit.
So, the question is, what is really happening? My guess is the stock market is undergoing what is called a sector rotation. A sector rotation is simply taking money from one sector of the market (i.e. selling that sector’s stocks) and then using it to buy other stocks in a different sector. In fact, the high growth and big companies have suffered the hits the most in recent times. Most of the money is now being channeled towards the recovery stocks (stocks that were hit during the pandemic).
This means that the stocks that fell during the past year due to the pandemic and subsequent lockdown are now rising, while the stocks that shot up during that time are now beginning to fall. This is a normal occurrence in the stock market (monies moving from financials to tech and vice versa) and this is why I am saying there is no need to panic. Now, volatility in the market is more amplified, and the movement between the stocks has become more noticeable.
This is why it is advisable to own stocks in different sectors of the market. It is sometimes called “Balancing your portfolio.” Balancing your portfolio simply means that no matter how much the sector rotates, you will most likely still be in the green.
As a smart investor, these types of days are days for investments. So, you need to keep a keen eye on these sorts of opportunities. When you comb through your watch list, you will definitely be able to identify those great stocks that are not doing too well, buy them, and watch them pick up again. Take Facebook stocks for instance. It has been undervalued for a while, but investors have started buying back into the stock because they cannot predict when it would rise again, and they do not want to be caught unawares. So, they have started buying the stocks, and now Facebook stocks are beginning to recover. It will most likely play out across other different stocks over the next few weeks. Now, this does not mean that every stock will recover as quickly as Facebook, but you have to watch out for the ones with the potential to.
In conclusion, there are a lot of potential stocks out there, and the fact that the stocks are going down should be a great opportunity for a smart and keen investor. So, invest wisely, be patient, and understand that stock investments should be a long-term plan.
If this blog taught you something new, please like and share it. Also, drop your views and comments with us. I am also waiting to see more people subscribe to my channel and join my Facebook community.
Recommended books for further reading:
- Intelligent Investor: The Definitive Book on Value Investing – A Book of Practical Counsel
- The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns (Little Books. Big Profits
- Stock Market Investing For Beginners: The Investment Guide – How to benefit from the crisis, invest in stocks, and generate long-term passive income incl. ETF and Stock Picking Checklist
- The Stock Market Investing Guide #2020: From Beginner to Intelligent Investor within 30 Days – How to Save Money, Generate Passive Income and Reach Financial Freedom
- The Financial Times Guide to Investing: The Definitive Companion to Investment and the Financial Markets: The Definitive Companion to Investment and the Financial Markets