Investments: Long vs Short
Ok. This is as close as I’m going to get to talking about the current pandemic. The only reason I bring it up is because I’m made I didn’t start investing a couple days ago and thought it would be good to share.
If you watch the news you might catch the part where it says the market is going up and down after different announcements. The biggest lesson I ever learned with stocks is to not over react and stick to a plan. I wanted to jump in when the market was low and I did not stick to the plan. The market jumped massively making me miss an easy increase in value.
But the basic thing I wanted to cover is that most people deal with stocks for a long term plan. Long term in market/accounting means it passes a year. Under a year is short term. So if you had a long term plan already in place before the big drop and stuck with it your would loss less than trying to cancel your long term plan for a short term reaction. (I’m saying less because we don’t know how much or when the market will climb again.) I support making a plan (with regular review points) and sticking with it. The math example follows:
Scenario: You had $100 in when it drop and the new value is $30 during but it goes back to $80 afterward.
Long Term Plan: You stayed in the entire time. Now $80 value, $20 loss, no fees for any services. Possible increase or decrease because it is still stock.
Canceled the plan: You jumped ship part. Maybe around $75 but your broker charges you for changing your plan and taking your money out early. Maybe 20% of your initial investment= $20 Totals: Cash in hand $55 (75-20), $45 loss due to loss cash value and fees charged. You also have lost chance of it increasing in value because it is now cash in hand.