Business & Investment

Three ways market downturns can hurt return on investment

Investing in the stock market definitely has a significant share Capital risk.. But even the most veteran investors don’t want to lose money on the stock market. The threat of a serious market crash can shake the spine of investors who have already experienced a previously harsh operating environment.

Even major stock market modifications can be devastating to investors. The stock market remains bullish past mid-September, so people may have begun to speculate when the next recession will occur.

Today, we’ll look at three ways market downturns can negatively impact returns and how to make the right investments. Growth stock It may be a great way to mitigate your losses.

1. High rewards carry greater risk

You need to know that stock market volatility will never really go away. Many stock market investors tend to opt for exciting stocks that deliver great growth in a bull market environment. When the market is modified, high-risk companies tend to fall sharply. The goal is to find a company that can provide decent growth without putting too much risk on the investor’s capital.

2. Investment more than you can afford

Too many stock market investors go outboard by becoming greedy during the bull market by borrowing money to get the capital to buy more stock They tend to be at risk. Borrowing capital to invest can offer you great profits. However, you can lose money due to a major stock market revision.

It is better not to take a debt to get investment funds. Even better, you should focus on investing only in what you can afford to lose.

3. Sell in a panic

As the February and March 2020 market crashes have shown, a recession can lead many investors to sell their investments and flee the stock market. Impulse sales will bring about an even bigger decline in the market. You should expect it to happen, but if you have a long-term view, you shouldn’t mislead you and sell unnecessarily good investments.

History shows that high-quality stocks can recover from a stock market crash. Companies with weak fundamentals and unable to adapt to the changing market environment can collapse and become angry. Choosing the right growth stock with solid fundamentals can mitigate its risk to capital, even if the stock faces short-term challenges in a recession.

Consider investing in high-growth stocks

goeasy (TSX: GSY) If you’re looking for a high-growth stock with solid fundamentals, stocks are a good example to consider. The 2020 market plunge caused stock prices to fall by more than 60% in the weeks February-March 2020. At the time of writing, the share price has risen more than 600% from its March 2020 low and is trading at $ 209.35 per share.

Subprime mortgage companies are becoming more popular with consumers as an alternative to traditional lenders. Over the last two decades, the company’s share price has risen almost 8,900%. The company has recently become a reliable provider of non-prime leasing and lending services during pandemics, and may continue to provide outstanding shareholder returns through its credible business over the next few years.

Stupid takeaway

Minimizing risk while maximizing profits in the long run is an ideal way to go if you want to succeed as a stock market investor.have Long-term outlook Of the investments you choose for your portfolio today, it is important to achieve your financial goals.

Goezy stocks are one of the best growing stocks in the pandemic and could be on track for the next few years. By investing in stocks like goeasy, you can prepare for long-term wealth growth without causing short-term madness in the stock market.

This article represents the opinion of a writer who may disagree with the “official” recommendation position of the Motley Fool Premium Services or Advisors. We are Motley! Asking investment treatises, even our own treatises, can help you think critically about your investment and make decisions to be smarter, happier, and richer. As a result, we may publish articles that may not match recommendations, rankings, or other content. ..

Stupid contributor Adam Ottoman There are no positions in any of the listed stocks. The Motley Fool does not have a position in any of the listed stocks.

Three ways market downturns can hurt return on investment

https://www.fool.ca/2021/09/17/3-ways-a-market-downturn-could-affect-your-investment-returns/ Three ways market downturns can hurt return on investment

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