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3 Good Reasons Stock Investors Should Be Holding On Tight

Doug Whiteman
3 Good Reasons Stock Investors Should Be Holding On Tight

The stock market has been taking investors on a bumpy ride, and there are fears that the U.S.-China trade war could end the market's long rally.

When stocks have a bad day, you could find yourself thinking about pulling out your money and putting it into a crawl space, a la Walter White on Breaking Bad. But that's the worst thing you could do.

Resist the urge to get off the roller coaster. Here are three good reasons to keep calm and invest on.

1. The market will recover

Stocks always bounce back.

No matter how awful things may look on a particular day or during a particular week, stocks generally make back their losses and then some.

"In the short term, the stock market could fluctuate up and down," says Tenpao Lee, interim dean and professor of economics at Niagara University. "In the long term, the stock market will always move up."

The market's recent behavior is nothing out of the ordinary, says Dave Nugent, chief investment officer for the automated investing service Wealthsimple.

"Being patient and continuing to invest through market volatility is the most important (and hardest!) thing to do as an investor," Nugent said, in an email. "But it leaves investors better off in the long run."

2. You have goals

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A downturn is a good opportunity to reflect on your long-term goals.

Aren't you invested for the long haul, working toward a big goal down the road — maybe a comfortable retirement? The worst thing is to go off track by ditching investments just because Wall Street has a rough couple of days.

If volatility in your accounts keeps you up at night, maybe you need to reevaluate your investment mix. You should be diversified, to help you weather these storms.

The best approach is to not look at your battered balances and keep your hands off your portfolio. A service like Wealthsimple will automatically adjust your investments in the face of changing market conditions.

3. It's a great time to buy

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Go shopping -- for stocks at cheap prices!

When the stock market takes a beating, don't think about what you're losing. Instead, focus on what you could be buying.

A market plunge or "correction" makes stocks cheaper. If there's a company or sector you've had your eye on, a good time to get in is when prices have been beaten down.

Don't be wary of taking on new investments while the overall market is in the tank. But you also don't want to go all-in on any one stock, Professor Lee warns.

"Many that used to be solid companies have disappeared or have been in trouble in the last 10 years, for example Sears, General Electric, Xerox, Eastman Kodak, Lehman Brothers, etc.," he says.