Those of us looking to invest might be seeing dollar signs with the current state of the stock market. But there are downsides of investing in a falling market. It can seem uncertain, there’s a lot to think about and you might not be in the position that you want to be to invest.
While I am no expert in investing, here’s what my research tells me can be the downsides of investing in a falling market:
There Are No Guarantees
Just because the stock market is down doesn’t mean that it’s going back up again. Yes, it most likely will, but we have no idea when that’s going to happen. We also have no guarantee when it comes to the specific investment that you’re making. They always have the potential to go wrong.
All-in-all at the end of the day there are no guarantees when it comes to investing. It can be even harder to see the upside to investing when the market looks so bad. But on the bright side, the potential for increase is there. If you invest when the market is down, there is a great potential to make money when it goes back up.
Too Much Choice
There is a lot of choice out there and one of the downsides of investing in a falling market is the fact that it can be hard to decide what to invest in. When everything’s down, everything might look good. But not all investments are the same. Companies differ a great deal based on their business model, their profitability and their industry segments.
However, when it comes to picking the best investments, making the right choice for your future is what’s most important. This means choosing investments based on your risk tolerance and making decisions based on best practices (including diversification and reducing fees).
One point to consider is you can always do some market research to whittle down your choices. There are several good ways to do this. One good way is to start by picking up the phone and talking with people who know about specific companies or industries. You can also sign up for a full service brokerage account like Fidelity or Schwab. They usually have comprehensive reports and helpful industry information. Lastly you can always fire up your favorite search engine and visit any number of niche investing sites. There is lots of good information available on the web about projected stock prices, or which companies are making money.
Can Be Costly
You can invest with almost nothing, but most people want to wait until they have a good chunk of money that they can invest with. And while now might seem like an amazing time to invest because much of the market is falling, it might also be a bad time for your personally to invest.
If you don’t have the money to invest, it’s probably best not to. And one of the downsides of investing in a falling market is that it might be too costly for you right at this time.
That said, there is also a great opportunity for those of us with a little bit of wiggle room to get access to investments that we might never see at this point again in our lifetime. If you are in that position or think you might be, you should consider talking to your financial advisor.
What do you think are the downsides of investing in a failing market? Share your opinion in the comments below.
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Tae started out as a journalist before following the money into the corporate world. But it turns out that the grass isn’t always greener and now you can find her spending most of her time writing about all the things she loves. Namely, money, travel and business with a hefty dose of self-deprecating humor. She is a podcast fanatic, blogging aficionado and loves to find new ways to turn passions into cold hard cash!