There’s always the fear of stock market crash; especially today where it is felt the most due to the Covid-19 pandemic worldwide. With non-stop streaming of information through social media, almost every bit of information seems to be enough grounds to start trading shares in your brokerage or retirement account.
When facing a market crash such as today, there is a formula that should be followed. By doing so, unprecedented things can be dealt with and still focus on the growth of your finances.
Number 1. Buy Good Businesses
You should be buying shares of a good and established business that is capable of generating real profits. At the same time, you should be looking at the following:
- Low-to-moderate debt-to-equity ratio
- Improve gross profit margin
- Shareholder-friendly management and;
- Franchise value
Number 2. Stick to a Formula
The dollar-cost average into and out of position, the selling and buying at fixed rates as well as the set amounts of money will let you steer clear of buying something that is at peak or even selling that is at its bottom.
You will never be able to time the market so better stick to routine policy of the regular share liquidation or accumulation.
Number 3. Reinvest Dividends
You have to reinvest your dividends for it is going to supercharge your dollar-cost averaging. Jeremy Siegel is a renowned finance professor who has shown several times that reinvesting dividends bring big component to overall wealth of investors who have made big fortunes in investing in the financial market.
Number 4. Always have a Backup
Lastly, the key in building your wealth is by creating backup money generators as well as several other income sources. This is among the single most valuable thing that you could do in eliminating risks.
Even if you are a lawyer who is earning 500,000 dollars a year or an investor doing day trading investing and making a million dollars annually, you will have a more enjoyable and fruitful life if you are not dependent on your next paycheck just to maintain your lifestyle. It is not straightforward to make money and generate wealth. However, by applying the procedures above and sticking to your plan, bit by bit you are going to get the hang of it and grow your finances.
Of course, let us not forget to check with financial professionals to ensure that whatever it is we are doing is right.