In your investing journey, there may be times that things won’t work out the way you want them to. You might see that the returns from your investment may be less than what you expected, or even that the value of your investment is less than the amount you originally put in.
This is a possibility no matter what product you choose, and it can’t be avoided when you invest.
Of course, it isn’t sure that this will happen at all. There’s also a chance that your investment will perform as expected without ever significantly losing its value. But if your investment is down, these are the things you should do.
Don’t panic
It may be hard, but you should resist the urge to immediately get your money out of your investment. While you may eventually end up doing this, you need to make a rational decision based on a proper analysis of the situation.
If, for example, your investment is experiencing one of the usual market cycles that most asset classes go through, there is a big chance that it will recover its value. It could even grow much more than before.
If you sold when it was down, you would have turned your paper loss into actual loss. Then, if you decide to put your money in the same investment again, you would have reduced the amount of potential profit.
Look for the cause
Try to understand what caused the drop in your investment’s value. Is it a market cycle? Is the company whose shares you own experiencing lower revenue? What industries or asset types are affected? Those are some of the questions that you will need to find answers for.
Learning the reason behind the change will give you the information you need so you plan out what to do. This knowledge may also be useful when you look at the performance of your other investments, even those that haven’t dropped in value.
Decide on your next steps
Once you’ve found out what the cause is, you’ll need to make a rational decision on what to do with your investment. Will you be pulling your money out and putting it in a different product? Will you keep your money in and wait for it to recover? What effect will it have on your financial goals?
Reading up on how the market is doing and getting the advice of an investment specialist can help. But, at the end of the day, the choice is yours to make. When it’s time to choose, make sure that you make the most rational decision possible, so that you can increase your chances of having a good future by reaching your goals.
This may also be a good time to evaluate your portfolio to see if changes need to be made.
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