What to do when your equity investments are down

By Randell Tiongson on October 2nd, 2023

Are you concerned with your investments?

The PSEi has been recovering in the last few days and as of this posting, it is now at 6,338 – not bad considering the present economic and investment challenges we are experiencing. However, if you invested 5 years ago, there is a high chance that you equity investments are in the red.

Investing in equities, whether through individual stocks, VUL, UITF, or mutual funds, can be an exciting and potentially rewarding endeavor. However, the stock market is inherently volatile, and it’s not uncommon for your equity investments to experience periods of decline. When your portfolio is in the red, it can be challenging to stay calm and make rational decisions. In this article, we’ll explore some practical steps to take when your equity investments are down, whether you own individual stocks or mutual funds.

Stay Informed and Stay Calm

The first and most crucial step when your equity investments are down is to stay informed and remain calm. Stock markets go through cycles of ups and downs, and fluctuations are a natural part of the investment process. Avoid making impulsive decisions based on fear or panic. Instead, focus on understanding the reasons behind the downturn and remind yourself of your long-term investment goals.

Assess Your Investment Strategy

Take a closer look at your investment strategy. Are your investments aligned with your financial objectives, risk tolerance, and time horizon? If not, it might be time to reevaluate your portfolio and make necessary adjustments. A well-structured investment plan should help you weather market downturns more effectively.

Diversify Your Portfolio

Diversification is a key strategy to mitigate risk in your equity investments. Ensure that your portfolio is not overly concentrated in a single sector or asset class. A diversified portfolio may include a mix of stocks from different industries, regions, and market capitalizations. Mutual funds and UITF inherently offer diversification, so ensure your VUL, mutual fund or UITF holdings are spread across various asset classes.

Don’t Try to Time the Market

Attempting to time the market by buying and selling based on short-term fluctuations is a risky strategy and often leads to poor investment results. Instead of trying to predict market movements, focus on a long-term, buy-and-hold approach. History has shown that markets tend to recover over time, and missing out on the recovery can be more damaging than the downturn itself.

Peso-Cost Averaging

Consider implementing a peso-cost averaging (PCA) strategy. With PCA, you invest a fixed amount of money at regular intervals, regardless of market conditions. This approach can help you buy more shares when prices are low and fewer shares when prices are high, ultimately reducing the impact of market volatility on your portfolio.

Review Your Investment Holdings

If you own individual stocks, it’s essential to periodically review your holdings. Are there underperforming stocks that no longer fit your investment thesis? Assess whether it makes sense to sell them and reallocate the funds into more promising opportunities. For mutual fund investors, periodically review the fund’s performance, fees, and manager’s track record.

Consider Professional Advice

If you’re uncertain about how to navigate a downturn in your equity investments, it may be beneficial to consult a financial advisor. They can provide you with personalized guidance based on your financial goals and risk tolerance, helping you make informed decisions during turbulent times. Check out professionals who have earned the RFP (Registered Financial Planner) or AFP (Associate Financial Planner) designation marks.

Stay Patient and Stay Invested

The key to successful equity investing is patience and a long-term perspective. Remember that downturns are part of the investment journey, and markets have historically rebounded after setbacks. By staying invested and maintaining discipline, you increase your chances of benefiting from the market’s long-term growth potential.

Experiencing a decline in your equity investments can be unnerving, but it’s essential to approach the situation with a calm and rational mindset. By following these steps and staying committed to your long-term investment goals, you can navigate market downturns with confidence. Remember that investing is a journey that requires time and patience, and staying the course is often the most prudent strategy for building wealth over the long term.


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What to do when your equity investments are down