The Motley Fool

3 key questions to ask yourself after October’s market crash

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Businessman looking at a red arrow crashing through the floor
Image source: Getty Images.

Forget Halloween. Having seen the value of their portfolios drop by double-digit percentages, the last month has already provided more than enough shocks to the system for some investors.

Since the most difficult moments in investing often provide the greatest opportunities to learn, here are three important questions all Fool readers might like to ask themselves at the current time.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

1. Do I know what I’m doing?

The wonderful thing about investing is that it requires no formal qualifications — anyone can make money from the market. Unfortunately, the opposite is just as true. As Warren Buffett — the best investor who’s ever lived — reminds us, investing is “simple but not easy.”  

Whether it turns out to be the beginnings of a bear market or a mere correction, the sudden drop in the prices of stocks over October is a great antidote to any feelings of invincibility that may have been picked up over the course of the longest bull market in history. It’s easy to become complacent when — despite the odd wobble — markets have been steadily increasing in value since the dark days of the financial crisis. 

Recent weeks give us the chance to re-evaluate whether we really do have an edge on the market. Some may realise that stock-picking, as opposed to passive investing, just isn’t for them

2. Am I taking on too much risk?

Following on from the point above, knowing what you’re doing doesn’t mean you’re doing it right.

A simplistic view of investing is that it’s about making as much money as you can. I prefer to see it as learning how to grow your wealth in such a way that allows you to reach your financial goals while minimising the possibility of losing your shirt. Assuming you’re doing this on your own rather than employing the services of a financial adviser, that means regularly evaluating your tolerance for risk.

October has provided a perfect opportunity to learn more about how you react when things get volatile, something that’s hard to do when everything is appreciating in value. Put simply, if you’ve been unable to sleep soundly over the last few weeks, you may wish to question whether your strategy is appropriate. 

Even if you are happy with the shares you hold, signs that the market may be turning should encourage you to reassess the way in which your money is allocated. Thanks to its tendency to be negatively correlated to equities, having a proportion of your cash in assets such as gold, for example, might be an idea. 

3. Am I capable of buying when others are selling?

We’re told by the world’s greatest value investors to be ‘greedy when others are fearful’. October has given investors a snapshot of just how capable we are of applying this advice in practice.

Don’t despair if you’ve been hiding behind the sofa. As humans, we’re programmed to run with the herd. That’s why pound cost averaging — investing the same amount at regular intervals — can be a great solution. Better to buy some shares when they’re cheap rather than none at all. 

Of course, this means having a sufficient amount of cash to do so. That’s why it’s always advisable to keep some powder dry for the inevitable downturns.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic…

And with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be daunting prospect during such unprecedented times.

Fortunately, The Motley Fool is here to help: our UK Chief Investment Officer and his analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global lock-down…

You see, here at The Motley Fool we don’t believe “over-trading” is the right path to financial freedom in retirement; instead, we advocate buying and holding (for AT LEAST three to five years) 15 or more quality companies, with shareholder-focused management teams at the helm.

That’s why we’re sharing the names of all five of these companies in a special investing report that you can download today for FREE. If you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio, and that you can consider building a position in all five right away.

Click here to claim your free copy of this special investing report now!

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.