When the market pulls back, don’t panic! Do this instead…

Julie Brownlee, Fsp Invest, 12 Nov. 2014

Tags: market pull back, market pullback, what to do if the market pulls back, investing, investment strategy, investor,

Last month, the stock market was all over the place. With the financial crisis still fresh in the minds of many investors, it can result in many running to sell their shares.

But panicking is the worst thing you can do. When the market pulls back, you should look at it as an opportunity.

So what should you do when the market pulls back?

Read on to find out…

What to do during a market pull back

The first thing you need to bear in mind is that a market pull back is usually short-lived. One day it will stop and the stock market will resume its normal behaviour, Matthew Carr in Investment U explains.

Yes bull markets do come to an end and the market will enter a bear trend. But many times when you see a market pull back, it’s just that.

Instead of panicking, the best thing to do is view a market pull back as a buying opportunity. You can use times like this to buy shares that you’ve been watching for a while, but have just been too expensive.

A market pull back gives you a chance to buy shares at more reasonable prices.

Why you always need to look to the future as an investor

Make sure you have a shopping list of shares that you want to buy if the price is right. They may be shares you already own or ones you haven’t got yet.

But always have a list of shares to buy when the market falls and drags their share prices with them.

Of course, you also need to have a strategy in place to protect your existing positions in times of market pull backs.

You may opt to run trailing stop losses on your positions. Trailing stop losses help you protect your capital and your profits.

If a trailing stop loss forces you to sell, you can use this money to invest in other shares trading at appealing prices.

So there you have it, what you should do when the market pulls back.

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