Investing in this crazy time might sound ludicrous to many people out there. Money has to go somewhere and investors that know how to respond in these situations are making a fortune.
How to Make Profit as Markets Fall
Making a profit as markets fall is called “short-selling”. You can do this by pressing ‘sell’ even if you don’t own the asset. If the market moves down, you make money. You can access an account that allows this via specific brokers. Open an account HERE.
As you can see by looking at almost anything right now, short sellers would have made a lot of money.
In It For The Long Haul
While prices are dropping, every dollar you own will effectively buy a little more of the assets that get cheaper. A stock that was once $1, is now $0.50, you would get double the shares for your money.
As prices get lower, we know that prices have a tendency to some day get higher than they were previously. So a portfolio of shares, might have a good chance of getting back up to it’s previous highs.
The downside is, that this may take time and your portfolio will likely go down further for a period if COVID-19 (coronavirus) does not clear up soon. This also means that prices will get cheaper, leading us into the next important concept for investing in these challenging conditions.
Dollar Cost Averaging
Dollar cost averaging is a concept whereby you invest each period (weekly, monthly, quarterly). Regardless of the price of the asset, you enter in each period (unless the price is massively high). The entry price of the investment averages out and fluctuations down play a role in the asset being cheaper, while moves higher play a role in increasing the asset/portfolio. Dollar cost averaging is a way of reducing uncertainty and gaining exposure to the markets when you don’t know what the future holds (which is really all the time).
Trading and Algorithms
One way people are making money is through algorithms. Trading algorithms are tested against market conditions and put on hold in conditions where they are unlikely to be profitable (by using technical indicators, months of the year (seasonal), pricing and many other situations. These algorithms are on autopilot once set up and would have the capacity to be profitable in these conditions.