Both the stock and crypto markets are tanking.
If you’re following me on Twitter you know I’m an advocate for both stock and crypto investing.
Now, many of you are new retail investors and have only just started buying into the stock and crypto markets.
And if you’re worried about the markets tanking right now, don’t be.
I’m going to walk you through the best thing you can do when the markets are down.
Welcome to Franknez.com – the blog that provides you with market news and trending investing topics. The markets are tanking, here’s how you and I can handle it.
Let’s get started!
Why are the markets down?
There’s an array of reasons as to why the markets are currently down.
With the biggest being liquidation in the markets.
I’m going to break this down in the simplest form possible.
The stock market truly caters to hedge funds and a variety of private family offices and financial institutions.
Market makers are companies that process every order in the stock market.
These market makers, hedge funds, and private family offices are notoriously known for going short on stocks and betting against them.
Well, recently we’ve seen ATHs from the S&P500, the NASDAQ, Tesla, AMC, GameStop, and many more.
Companies shorting these stocks and indexes have been losing a ton of money during the rise of these assets.
In order to keep up with their margin requirements, they must liquidate certain long positions whether it be in the stock or crypto markets.
Crypto enthusiasts aren’t selling, it’s the financial institutions who are in need of the capital to keep certain positions afloat.
Worldwide news is influencing the markets
Another reason why the markets are going down is because global news such as Omicron and Covid is influencing institutional psychology.
I would say sentiment, but institutions trade based on psychology.
Now, this is completely out of the control of the retail investor.
So, what can you do to whether this storm?
Well first, one of the best things you can do when the markets are tanking is to not panic.
Now that that’s out of the way, let’s get right into how to weather this storm.
#1. Assess your risk
Some of you are still profitable, some may be breaking even, others are down significantly on their investment portfolios.
Whatever your situation is, you’ll have to assess your risk.
Can you stomach seeing your portfolio completely (but temporarily) plummet?
Did you buy high and are now seeing your investment crash?
You’ll have to ask yourself whether it’s worth setting a stop loss and eating a few losses to re-enter much lower.
Or perhaps you’re confident in the possibility of a correction eventually eliminating any paper losses.
The important thing to remember when investing in the markets is that long-term investing often times yields the results.
#2. Take a long-term approach when investing
Let’s take Bitcoin as an example.
Early adopters bought the cryptocurrency when it was worth only cents and sold at $10.
If they had viewed Bitcoin as a long-term asset oppose to a swing trade, they would have become multi-millionaires a decade later.
We can also use SPY stock which tracks the S&P 500 as an example.
This safer long-term index fund has more than tippled in the past decade.
Investing a hefty $300,000 would have multiplied your investment to just over $900,000.
No matter the results, it’s long-term investing that yields them.
Remember that today’s market drops are only temporary.
Investors tend to see their rewards in the long run.
#3. Identify buying opportunities
When the markets are going down it’s the perfect time to strategize and identify buying opportunities.
Your risk tolerance will guide you here.
The markets tend to naturally bounce back during a correction.
Will you take the opportunity to buy assets at a discount or will you miss these buying opportunities?
Most retail investors fail to identify the massive opportunity at hand when the markets begin to tank.
And while no one will ever truly be able to identify the bottom, go based on your instincts to secure a fire sale even if it continues to further dip.
Because even if you miss a lower bottom, that discount will eventually profit in the long-term.
When Bitcoin dipped to $30k during the summer of 2021, I bought the dip and doubled my investment when it surged to $60k again.
So what if the crypto market is going down again?
The futures of the crypto market are incredibly high to not buy even during a bull run.
Strategize and you’ll be okay
And there you have it ladies and gentlemen.
These 3 strategies are going to help you make a lot of money in the long-term whether you invest in stocks or crypto.
The stock and crypto markets may be going down but that does not mean you cannot take advantage of the dips.
Always have a plan and never invest more than you can afford to lose at the moment.
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