How to avoid money traps in a volatile market?

By Brian Sitnamy

The huge volatility of financial market is self-evident since early April amid chaotic environment given variety of policy uncertainties and concerns around future economic outlook, how to avoid money traps in a volatile market is far more important.

The following are four tips that help investors avoid common money traps that could leave investors exposed to losses.

No1: Don’t put more money in the market than you can stomach. Whether it is margin calls or anxiety about losing money you can’t afford to lose, bad decisions are often made during desperation.

No2: Don’t hope that you can get back to breakeven. If you’re only holding a long position because you don’t want to lose money on the trade, you risk losing more. Bottom line: Own a stock based on fundamental, not hope.

No3: Don’t assume yesterday’s investment rationale will work tomorrow. Ask yourself, “Has something changed in the fundamental case or is it a case of market volatility?” If something changed, make adjustments immediately.

No4: Don’t cut flowers and keep weeds. Often, the highest quality companies will outperform in a downward market. Hold high quality company is the best way to protect your portfolio in a volatile market.

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