Recovering from Stock Market Losses and Staying in the Investment Game

With no slowing and inflation and a recession looming, the stock market is going in fits and starts, with the S&P 500 posting its worst first-half performance in decades. How to recover from losses and stay in the game.

Turbulent stock market amid inflation

Although stocks rallied on the last day of June, the S&P 500 posted its worst first-half performance since 1970. Persistent inflation at decades-long highs is putting pressure on share prices as experts watch warning signs that are hinting at a recession, CNBC reported.

Recovering from losses and moves to stay in the game

So what should you do if you are among those taking losses during this turbulent time? Should you pull out of the stock market? Here are some moves to make to recover from losses and stay in the investment game.

Here are 4 strategies…

#1. Should you stay in the game?

Keep in mind that even though the price of the stocks you own may have fallen sharply, it’s only a paper loss. The real loss would be to sell now. If you hold onto the stock, the loss goes unrealized. There’s always the possibility the price of the stock will rise again in the future, recovering the loss, and possibly even creating a paper profit.

#2. Buying into the dip

Stocks are currently in a “bear market,” a term that refers to any time the market takes a dip of 20 percent or more. If you can tolerate risk, a bear market presents an opportune buying time to purchase previously expensive stocks at a cheaper valuation. If the stock makes a rebound, you may even recover your losses or reap larger returns, US News reports.

#3. Buying into alternative investments

When the market takes a dip, many investors move their money into a variety of different asset classes that can be more stable (albeit with lower returns) such as bonds, gold, commodities, EFTs (exchange-traded funds), or REITs (real estate investment trusts). Some may diversify across these sources until the market rebounds.

#4. Diversifying into international markets

When the US stock market is losing strength, some investors choose to diversify across geographies, purchasing stocks from international markets such as Canada, Japan, Europe, and Australia, and even emerging markets such as China and Brazil. One investment area in international markets many investors like is exchange-traded funds (EFTs) because they are easy, affordable, and don’t require one to do extensive research. However, it should be noted that inflation is starting to take a toll on other nations. Not all are at the level of that of the US yet, but other countries are also seeing historical spikes. For example, France just hit a 36-year high in May.