Want to launch your own branded card program? We break down the what and how—unlock new revenue, boost loyalty, and stay ahead in the digital payment game.
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Ever wondered how companies launch those shiny credit cards with their logos on them? Let's dive into the world of card programs and break down everything you need to know to launch one successfully.
What's a card program, anyway?
Think of a card program as your business's very own payment ecosystem. It's like having your own mini-bank, but without the vault, technical infrastructure and security guards. Companies use card programs to offer payment solutions to their customers or employees, whether a store credit card, a corporate expense card, or even a digital wallet.
As you’ve probably figured, the financial world is quickly moving away from cash, and card payments are becoming the norm. In fact, they're now as essential to business as having a product, website or social media presence.
Why should your business launch a card program?
Launching a card program isn't just about joining the cool kids' club – it's about creating real business value and heightened exposure. Here's what you can achieve:
Keep your customers coming back
Remember those loyalty cards from your favourite coffee shop? Card programs take that concept to the next level. When customers have your card in their wallet, they're more likely to choose your business over competitors. Plus, every time they pull out that card, they (and everyone else around) see your brand.
Show me the money!
Card programs open up exciting new revenue streams. You can earn from:
- Interest charges (if applicable)
- Transaction fees from merchants
- Annual membership fees
- Premium features and services
- Insights and information on spending habits
Know your customers better
Want to know what your customers really want? Their spending patterns tell the story. Card programs give you valuable insights into customer behaviour, helping you make smarter business decisions.
Understanding the card program ecosystem
Let's break down the key players in this game:
The dream team
Picture a football team where everyone has a crucial role:
- Card networks (like Visa and Mastercard) are the referees, setting the rules
- Card issuers (like Tap) are the coaches, making sure everything runs smoothly
- Processors (overseen by Tap) are the players, handling all the transactions on the field
Open vs. closed loop: what's the difference?
Open-loop and closed-loop cards differ in where they can be used and who processes the transactions. Let’s break this down:
Open-loop cards:
These cards are branded with major payment networks like Visa, Mastercard, or American Express, and are accepted almost anywhere the network is supported, both domestically and internationally.
Examples: Traditional debit or credit cards, prepaid cards branded by major networks.
Pros: Wide acceptance and flexibility.
Cons: May come with fees for international use or transactions.
Closed-loop cards:
Cards issued by a specific retailer or service provider for exclusive use within their ecosystem. These cards are limited to the issuing brand or select partners.
Examples: Store gift cards (like Starbucks or Amazon), fuel cards for specific gas stations.
Pros: Often come with brand-specific rewards or discounts.
Cons: Limited to specific merchants; less flexibility.
Challenges that may arise
Let's be honest – launching a card program isn't all smooth sailing. Here are the hurdles you'll need to jump:
The regulatory maze
Remember trying to read those terms and conditions? Well, card program regulations are even more complex. You'll need to navigate through compliance requirements that would make your head spin.
Security
Fraud is like that uninvited guest at a party – it shows up when you least expect it. You'll need robust security measures to protect your program and your customers.
We’ve designed our card program to handle these niggles, so that you can bypass the challenges and reap the rewards. With a carefully curated experience, we take care of the setup, programming and hardware so that you can focus on the benefits and users.
Closing thoughts
Launching a card program is like building a house – it takes careful planning, the right tools, and expert help. But when done right, it can become a powerful engine for business growth.
Contact us to get started on building a card program tailored to your company. After all, the future of payments is digital, and there's never been a better time to get started.
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The process of investing involves putting your money or capital into something with the aim of earning more money and making a profit. Investment strategies are sets of principles, rules, and approaches that an investor follows to manage their investment portfolio. A sound investment strategy can help an investor achieve their financial goals, manage risk, and maximize returns.
In this article, we will provide a beginner's guide to investment strategies, including its definition, benefits, types, and key principles. We will also discuss various investment terms and jargon that a new investor should know.
What are investment strategies?
Investment strategies are plans of action that an investor follows to manage their investment portfolio. It involves selecting investments that align with their financial goals, risk tolerance, and time horizon. Good investment strategies takes into account market conditions, diversification, and risk management techniques.
The primary goal of investment strategies is to help investors maximize their returns while minimizing potential losses. These strategies can be created by the investor themselves or by a financial advisor and used across varying markets, from the stock market to the crypto market.
The benefits of having an investment strategy
Having an investment strategy can help you achieve various financial goals, whether they be generating income, building wealth, or funding retirement. It also helps you manage risk, reduce potential losses, and maximize returns. Strong investment strategies consider each investor's specific investment objectives, time horizon, risk tolerance, and market conditions.
Various types of investment strategies
There are several types of investment strategies that investors can implement during the investing process depending on their unique circumstances (risk tolerance, capital, financial goals, etc.). From value investing to income investing, we cover the most popular investment strategies below.
Value investing
Value investing is a strategy that involves buying stocks that are undervalued compared to their intrinsic value. This approach seeks to identify companies that are trading on the stock market at a discount price and have strong fundamentals.
Growth investing
The growth investment strategy is one of the best investment strategies as it focuses on investing in companies with high growth potential, even if they are currently trading at a premium. This growth investing strategy is designed around identifying companies with strong earnings growth, innovative products, or dominant market positions. Growth stocks will typically encompass both mature and emerging companies.
Income investing
The income investing strategy focuses on generating regular income from investments, such as dividend stocks, bonds, or real estate investment trusts (REITs). Here the aim is to provide a steady stream of income for investors, especially those who are retired or seeking passive income.
Index investing
Index investing is also one of the more common investment strategies that seeks to replicate the performance of a particular market index, such as the S&P 500 or the NASDAQ. This approach offers investors broad exposure to the market at a low cost.
Momentum investing
Momentum investing is a strategy that involves buying stocks that have shown strong performance in the past and continue to outperform the market. The aim here is to capitalize on the trend of rising prices and momentum in the market.
Contrarian investing
Contrarian investing is a stock market focused strategy that involves buying stocks that are out of favor with the market or have fallen out of favor. This strategy centers around identifying companies that are undervalued by the market and have the potential for a turnaround.
Active investing
Active investing is a strategy that involves actively managing a portfolio, often through the frequent buying and selling of assets. This strategy generates higher returns than passive investing but requires more time, research, and expertise.
The key principles of investment strategies
Regardless of which of the different investment strategies one chooses, here are some key principles that every investor should follow.
Set investment goals
Before you start investing, you should have clear investment goals and a plan to achieve them. Your investment goals should be specific, measurable, achievable, relevant, and time-bound.
Diversify your portfolio
Diversification is the process of spreading your investments across different asset classes, sectors, and regions. Diversification helps reduce risk by minimizing the impact of any single investment or market event on your portfolio.
Manage risk
Remember that all investments carry some level of risk, and it is important to manage risk to avoid potential losses. You should assess your risk tolerance and invest accordingly. You can also use risk management techniques, such as stop-loss orders, to limit your potential losses.
The long-term investment strategy
Investing is a long-term game, and you should be patient and disciplined in your investment approach. Playing the long game and investing in long term investments is more likely to deliver financial independence.
Control your emotions
Emotions can cloud your judgment and lead to irrational investment decisions. It is important to control your emotions and stick to your investment strategy, even during market downturns or volatility.
Focus on fundamentals
When selecting investments, it is crucial to focus on the fundamentals of the underlying companies or assets. This includes factors such as revenue growth, earnings, valuation, and competitive advantage.
Stay informed
The investment landscape is constantly changing so ensure that you stay informed about market trends, economic indicators, and company news. This can help you make more informed investment decisions and adjust your strategy as needed.
Investment terms that every investor should know
As a new investor, you may encounter various investment terms and jargon that can be confusing. Here are some of the most common investment terms and their definitions:
Stock: A stock represents ownership in a company and gives the holder a claim on a portion of its assets and earnings.
Bond: A bond is a debt security that represents a loan made by an investor to a borrower, typically a corporation or government.
Mutual funds: mutual funds are a type of investment vehicle that pools money from multiple investors to invest in a diversified portfolio of stocks, bonds, or other assets.
ETF: An ETF, or exchange-traded funds, tracks a particular market index and can be bought and sold on an exchange like a stock.
Asset allocation: Asset allocation is the process of dividing your portfolio among different asset classes, such as stocks, bonds, and cash, to achieve your investment goals and manage risk.
Market capitalization: Market capitalization refers to the total value of a company's outstanding shares of stock, calculated by multiplying the number of shares by the current market price.
Dividend: A dividend is a distribution of a portion of a company's earnings to its shareholders, typically paid out in cash or additional shares of stock.
Expense ratio: The expense ratio is the annual fee charged by a mutual fund or ETF to cover its operating expenses, expressed as a percentage of the fund's assets.
P/E ratio: The price-to-earnings ratio compares a company's current stock price to its earnings per share, indicating how much investors are willing to pay for each dollar of earnings.
Yield: Yield refers to the income generated by an investment, typically expressed as a percentage of its price or face value.
Market order: A market order is an instruction to buy or sell a security at the current market price, regardless of the price level.
Limit order: A limit order is an instruction to buy or sell a security at a specific price level or better.
Stop-loss order: A stop-loss order is an instruction to sell a security if its price falls below a specified level, designed to limit potential losses.
Bull market: A bull market is a period of rising stock prices and optimistic investor sentiment.
Bear market: A bear market is a period of declining stock prices and pessimistic investor sentiment.
Conclusion
Investing can be a complex and challenging endeavor, especially for those new to it. While understanding the different types of investment strategies, key principles, and terms is important, it can be extremely beneficial to consult a qualified financial advisor. An experienced financial advisor can provide personalized guidance to help you build an investment strategy tailored to your specific financial goals, risk tolerance, and life situation.
They can offer professional expertise in areas like asset allocation, portfolio diversification, tax optimization, and risk management. Working with a financial advisor takes the guesswork out of investing and can increase your chances of achieving your long-term financial objectives. Remember, investing is a journey, and having the right professional partner can make a significant difference in navigating that path successfully.
International Bank Account Numbers (IBANs) were first implemented by the European Central Bank (ECB) to provide a simpler way of transferring money to other countries. Now used around the world, IBANs have become a permanent fixture in the banking world and a vital component of international money transfers.
In this article, we cover what an IBAN number is, what it looks like, the difference between IBAN and swift codes, and lastly, where to find yours.
What is an IBAN number?
Short for International Bank Account Number, IBANs are unique account numbers assigned to an account for the purpose of making international money transfers easier. An IBAN number acts as a screening system that confirms account data before transferring funds between international banks.
The system was implemented to create an international standard for transnational transactions and reduce errors within the EU but has since been adopted by countries far beyond those borders. Since being implemented international money transfer errors have been reduced to 0.1% of total transfers.
What does an IBAN number look like?
An IBAN number is an alphanumeric code of up to 34 characters. Not to be mistaken for a bank account number, an IBAN typically includes the account number along with several other identifying codes. These include codes that identify the bank the funds are being sent to and the country. So what does an IBAN number look like?
An International Bank Account Number will always include:
- A two-letter code identifying the country
- Two check digits
- The bank code
- A code of up to 30 characters is known as the Basic Bank Account Number (BBAN) which is decided on by the country and is used as a national standard for domestic payments.
For example, a UK IBAN number will have the following format:
GB28VBCD12345612345678
GB represents the country code
28 represents the check digits
VBCD represents the bank code
123456 represents the sort code
And the next 12345678 represents the account number.
SWIFT codes vs IBAN numbers
You might be wondering at this stage what the difference is between a SWIFT code and an IBAN number. Let’s explore the difference below.
A SWIFT code (Society for Worldwide Interbank Financial Telecommunication), also known as a Bank Identifier Code (BIC), is a unique identification bank code used to identify the specific financial institution in international wire transfers. SWIFT codes consist of either 8 or 11 characters and include information about the bank and its location.
An IBAN (International Bank Account Number), on the other hand, is a standardized international numbering system used to identify bank accounts for international money transfers. As covered above, it typically consists of a country code, two check digits, and a BBAN. The purpose of the IBAN number is to help ensure that international payments are processed accurately and efficiently.
In summary, a SWIFT code is used to identify a specific bank or financial institution in international wire transfers. An IBAN number is used to identify a specific bank account in cross-border transactions.
Both codes are important for international money transfer and are used in conjunction with each other to ensure that funds are transferred to the correct account at the correct institution.
How to find your IBAN number
To find your IBAN number, you will need to check your bank statements, online banking portal, or contact your bank directly. The exact process for finding your IBAN number may vary depending on the country and financial institution, but here are some general steps you can follow:
Check your bank statement: Your IBAN number should be listed on your bank account statement, which you can access online or receive in the mail.
Check your online banking portal: If you use online banking, you can usually find your IBAN number by logging into your account and navigating to your account details or settings.
Contact your bank: If you cannot find your IBAN number through the above methods, you can contact your bank directly and ask them to provide it for you. Be prepared to provide your account number and other identifying information.
It's important to note that not all countries use an IBAN number, so if you are sending or receiving an international payment, you may need to use a different format for bank account identification.
Additionally, IBAN numbers can vary in length and format depending on the country and financial institution. Before you transfer money or make an international transaction always check what information is required and whether it is accurately inputted.
Tap’s business account and IBANs
When creating a business account on the Tap network, users will automatically gain access to their own IBAN number which can be used to receive international payments. With several currency options, the account caters to a wide range of industries and services.
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PAX Gold is the hybrid investment option bridging the gap between digital currencies and the gold market. This cryptocurrency provides the benefits of blockchain technology without the price volatility. The Pax Gold token also offers a more accessible way for traders to invest in physical gold assets.
What is PAX Gold?
PAX Gold (PAXG) is the biggest digital asset backed by underlying gold and each PAXG token represents one fine troy ounce of a 400-ounce London Good Delivery gold bar. The price of PAX Gold mimics the current gold market prices of gold, making it a more stable crypto investment with less volatility.
The crypto asset is issued by the Paxos Trust Company and the market value of the circulating supply is held in physical gold bars in vaults similar to how stablecoins hold reserves of the fiat currency they are pegged to.
To guarantee its integrity, the Paxos Trust Company undergoes and releases monthly audits to verify that its PAXG tokens are equal to the amount of allocated gold it holds. This process is regulated by the New York State Department of Financial Services.
Additionally, users have the option to redeem their PAXG tokens for allocated gold bullion bars whenever they desire, or for smaller amounts of unallocated gold bullion bars through a network of physical gold retailers around the world.
PAXG tokens are based on the ERC-20 token standard and provide users with all of the benefits of owning physical gold bars without the drawbacks typically associated with the physical commodities. These include limited accessibility, challenges storing the physical gold, difficulties transporting it, etc.
Due to its tokenized nature, PAXG can be traded for other cryptocurrencies in the sector, or simply redeemed for physical gold.
Who created the PAX Gold platform?
The Paxos Trust Company was co-founded by Charles Cascarilla and Rich Teo in 2012 with the aim to provide a more accessible and trustworthy means of moving assets. Cascarilla holds a degree in finance with experience in the capital management sector. He has also participated in multiple traditional and blockchain-based venture capital projects.
In 2018, the company released Paxos Standard (PAX), a stablecoin pegged to the US dollar, with reserves held in US bank accounts. In 2021, PAX rebranded to the Pax Dollar (USDP). The stablecoin remains one of the top 10 biggest asset-backed cryptocurrencies.
In 2019, PAX Gold (PAXG) was launched. The allocated gold-backed digital asset holds its reserves in vaults secured by Brinks. The company undergoes monthly audits which verify that the correct amount of reserves is held for each coin.
The company has achieved strong institutional support and secured more than $500 million in funding from reputable investors such as OakHC/FT, PayPal Ventures and Mithril Partners.
How does the PAX Gold work?
First and foremost, PAXG represents physical gold. PAX Gold (PAXG) is an ERC-20 token built on the Ethereum blockchain making it compatible with many dapps and decentralized exchanges within the DeFi space. When creating or destroying PAXG tokens, the company charges a small fee (0.02%) while the trader is liable for gas fees for any on-chain transactions.
Increasing investment entry barriers, the token is divisible by 18 decimal places, allowing anyone access to fractional ownership of a physical gold bar without the associated burdens of owning physical gold (transport, storage, etc).
Each PAXG token is allocated a unique serial number that matches that of an individual gold bar held in reserve. Holders are entitled to find the physical gold bar, its value, and other characteristics by using the PAXG lookup tool. Tokens can also be redeemed for gold, fiat currency, or other digital currencies as per the current market price of gold at that time.
PAXG transactions are closely monitored and surveyed by Paxos using third-party analytical tools for the purpose of investigating any potential cases of fraud or money laundering. In addition, developers subject the code to regular smart contract audits in order to detect bugs and vulnerabilities.
What is the PAXG token
PAX Gold (PAXG) is an ERC-20 token built on the Ethereum blockchain. Each PAXG token represents one fine troy ounce of a 400-ounce London Good Delivery gold bar which can be traced using the unique serial number.
The cryptocurrency offers investors exposure to the price of gold as well as investment opportunities otherwise difficult to access. The advantage of investing in cryptocurrencies like Pax Gold PAXG is that one can bypass the physical challenges of investing in real gold reserves. Instead, one can manage their investments from the convenience of their home.
The Paxos Trust Company holds all PAXG token reserves in vaults and undergoes monthly audits which are published on the Paxos Trust Company’s website.
How can I buy the PAX Gold token?
If you're looking to invest in the long-term value of high-quality gold without concerning yourself with physical gold bars, with the added benefits of blockchain technology Gold PAXG tokens might be the answer you're looking for.
Tap provides a seamless entryway to buying, storing and selling Pax Gold PAXG tokens. Users will simply need to download the Tap app, create an account and complete the quick verification process. From there they will gain access to a number of secure integrated crypto wallets and vetted cryptocurrency markets, including PAX Gold tokens.
The app not only allows users to buy, sell, trade and store cryptocurrencies, but also provides a payment service that allows users to make fiat payments directly from the app. Whether through an electronic payment or the Tap card, users can spend their crypto and fiat currencies anywhere, anytime.
Generally when one mentions investing, one thinks of stocks. Forming the foundation of more investment journeys, stocks or equities provide a tried and tested option for using capital to gain profits. In this article, we’re guiding you through the most important concepts you need to know when it comes to investing in the stock market, from what stocks are exactly to how to stock market basics.
What are stocks?
Also referred to as equity or shares, individual stocks are securities that provide fractional ownership in a company. Units of stock are called shares and entitle holders to "own" a small part of the issuing corporation. This can also entitle the owner to receive dividends from any profits the company might earn.
Other terms one might hear are exchange-traded funds (ETFs) which are stocks based on pooled investments that mimic the price of the underlying asset allocation while mutual funds are professionally managed investment funds. An investment portfolio can be made up of a collection of the above, or individual stocks, depending on your financial goals.
Stock market vs stock exchange
Stocks are traded on stock exchanges around the world and their price is driven by supply and demand. The term stock market refers to the entire industry while the term stock exchange refers to the platforms on which stocks are traded.
What is a stock exchange?
A stock exchange is an exchange platform where publicly-traded stocks can be purchased and sold through buyers and sellers, like the New York Stock Exchange for example. Initial Public Offerings (IPO's) are the primary mechanism of raising capital, where organizations sell shares to the general public in exchange for capital. This process allows the business to expand without incurring debt.
In exchange for being allowed to offer shares to the public, companies are obliged by law to publish financial information about the company's performance and grant shareholders a voice in how the business operates.
Advantages of investing in stocks
Before engaging in any stock market investing it is important to determine your risk tolerance. This pairs your current financial situation with the amount of risk you are willing to endure, anywhere from low risk to high risk. It's best to consult a financial planner should you be unsure.
Once this has been determined, you can build a strategy for your stock investments and partake in the many advantages that the stock market has on offer.
Profits
Should a company's share price increase, investors can make considerable profits by selling the shares at the right time.
Ownership
Shares provide investors with ownership in the company relative to the number of shares they own. As a shareholder, you gain access to a portion of the profits and may also receive voting rights within the business.
Dividends
Investors can earn passive income by receiving dividends from a company they have invested in when they pay out the profits made over a certain time period. Some companies offer quarterly dividends while others are annual.
Income and growth
Stocks deliver an ideal investment opportunity that can provide both income and growth. Investors looking for a more risk-averse investment and stronger financial stability will benefit from engaging in the stock market.
Experts can leverage your earnings
Skilled fund managers understand mutual funds inside and out, gaining skills that allow them to optimize investments to capitalize on market fluctuations. Constantly monitoring equity funds for opportunities to better position clients' portfolios, these experts continually revise their strategies as needed.
Disadvantages of investing in stocks
Requires time
If you are new to the industry and intend to invest on your own, you will need to undergo a considerable amount of research on each company before investing in it. You will also need to learn how to read financial statements and annual reports and keep an eye on the news when determining whether a company might be profitable in the near future.
No guarantees
While considered one of the "safer" investment options, individual stocks can still be high risk as there is no guarantee of what might happen to a company on a year-to-year basis or that you won't lose money. Always determine your risk tolerance before investing in the stock market.
Fluctuating prices
All markets are subject to volatility and the stock market is no exception. Be sure not to fall into the trap of making trading decisions based on emotion and stick to the golden rule: buy low, sell high.
How to invest in the stock market
Ready to start investing in the stock market? The process is probably simpler than you thought it would be.
- Find a brokerage account most suitable for your investment goals
Consider your short and long-term goals and determine which account is best suited to you, from college savings accounts to an individual retirement account to everything in between. - Find a brokerage company
Next, you'll want to find a brokerage company. Consider their available investment options, reputation, and fees when looking for the right fit. If you're looking to invest in stock mutual funds, individual stocks, or index funds, be sure that the brokerage account (or brokerage firm) provides the relevant services. - Deposit funds
Once you've opened your account you will need to deposit money to get started. This is generally in the form of a lump sum, however, monthly recurring payments can also be set up. - Determine which investments you want to open
After opening an account you can begin to purchase and sell stocks, as well as bonds, stock mutual funds or general mutual funds, index funds, and ETFs that are composed of hundreds of securities. Whether investing in various individual stocks or the investment options listed above, consider using a diversified, risk-friendly approach whereby you don't put all your eggs in one basket. - Confirm your investments by purchasing them
Once you've decided what to purchase, simply enter the ticker symbol in the buy field and specify how many shares you would like to acquire. And that's how you enter the stock market world.
Final thoughts
By their very nature, stock market investing can be volatile with numerous internal and external factors outside of the control of retail investors affecting stock prices. While exchange-traded funds and mutual funds might diversify this risk, it's best to assume that you are still susceptible to it.
During times of extreme price fluctuations within the stock market don't make emotional decisions and instead maintain patience. Consider writing down your goals beforehand and referring to this in times of market turbulence. Having a diversified portfolio of individual stocks will help mitigate risk.
It's critical to understand your risk tolerance before investing in the stock market and make sure you get investment advice from an expert so that you can determine the best course of action for yourself. By analyzing your personal financial situation, they are able to advise you on the best route for your financial goals, from whether it's best to invest in individual stocks or index funds before you start investing.
We are delighted to announce the listing and support of PAX Gold (PAXG) on Tap!
PAXG is now available for trading on the Tap mobile app. You can now Buy, Sell, Trade or hold PAXG for any of the other asset supported on the platform without any pair boundaries. Tap is pair agnostic, meaning you can trade any asset for any other asset without having to worries if a "trading pair" is available.
We believe supporting PAXG will provide value to our users. We are looking forward to continue supporting new crypto projects with the aim of providing access to financial power and freedom for all.
PAX Gold is the hybrid investment option bridging the gap between digital currencies and the gold market. This cryptocurrency provides the benefits of blockchain technology without the price volatility. The Pax Gold token also offers a more accessible way for traders to invest in physical gold assets.
PAX Gold (PAXG) is the biggest digital asset backed by underlying gold and each PAXG token represents one fine troy ounce of a 400-ounce London Good Delivery gold bar. The price of PAX Gold mimics the current gold market prices of gold, making it a more stable crypto investment with less volatility.
PAX Gold (PAXG) is an ERC-20 token built on the Ethereum blockchain. Each PAXG token represents one fine troy ounce of a 400-ounce London Good Delivery gold bar which can be traced using the unique serial number.
The cryptocurrency offers investors exposure to the price of gold as well as investment opportunities otherwise difficult to access. The advantage of investing in cryptocurrencies like Pax Gold PAXG is that one can bypass the physical challenges of investing in real gold reserves. Instead, one can manage their investments from the convenience of their home.
Get to know more about PAX Gold (PAXG) in our dedicated article here.
The performance of the money markets in 2022 was far from impressive. With inflation on the rise and real estate facing significant speculation, various markets experienced substantial setbacks. This includes the S&P 500, a typically used gauge of economic well-being, which saw a decline of 20%.
Among the fear and uncertainty, it's important to remember that markets ebb and flow and will recover, the only unknown is when this will happen.
While the golden rule is to remain level-headed and not make trades based on emotion (primarily fear), we understand that that's sometimes easier said than done. Remain a successful investor despite the market dip by conquering the emotional aspect of trading and getting a better grip on your investment portfolio.
You've assessed your risk tolerance, researched historical market volatility, and built an investing strategy, now tackle the winds of the bear market head-on with these three valuable tricks to avoid making costly mistakes.
3 tips on avoiding costly mistakes during market downturn
Investing in the stock market, or any emerging markets is like riding a rollercoaster, when the markets are down the only ones that get hurt are the ones that jump off. It is often more valuable to hold your investment and wait for the markets to recover (and yes, this may take years) than to liquidate a trade and make a permanent loss.
Consider how long the stock market has been operating and how many bear and bull markets it has experienced. The past performance of market history shows us that it will always correct itself.
1. Don’t abandon your investments
When your retirement account drops in value, it can be tempting to "protect" the remaining funds by selling off high-risk mutual funds or equity securities and moving them into something that is perceived as a "safe option" until the stock market steadies.
However, when investors try to exit the market this way, more often than not they end up losing more money than they would have had they ridden out the rollercoaster.
Remember, investing is a long-term game and requires a certain level of discipline, consistency, and patience. Financial journeys rarely turn to millionaire status overnight and should be centered around building long-term wealth as opposed to overnight success.
Instead of focusing on day-to-day or month-to-month performances, focus on the bigger picture. When the markets rebound and your balances start to reflect this, you will be grateful you left your diversified portfolio intact.
2. Take advantage of the "discount" prices and keep growing your investment portfolio
According to a study by Allianz Life, 54% of Americans have cut back or altogether stopped savings for retirement due to concerns about inflation. While we know investing involves risk, this can be a very costly mistake in the long run.
Consider periods of a market downturn as "sales" that offer shares on the stock market at discounted prices. When the markets are down, the same stocks that were previously being traded for high amounts are suddenly going for much less. "Buy the dip" is a popular investment phrase that encourages investors to buy when prices are down.
If investing when the markets are down makes you nervous, consider the data: historically, stock markets always recover. It might take years or months, but stock prices will return to previous levels, and more than likely exceed these. As will your investment portfolio's balance.
3. Consider talking to a professional financial advisor
While the main aim is to stick to the straight and narrow of fact-based trading as opposed to emotion-based, there is never a bad time to seek professional help when you think you might need it. A professional financial advisor can advise on questions or ideas you might have for managing your portfolio and might offer some peace of mind during dark times.
There's never a wrong time to ask for help, and never feel like you need to brave the markets solo.
Keep your investments on track (stock market and otherwise)
Investing isn't for the faint-hearted, especially when the markets are going through a dip. Consider the 2007 financial crisis for example, it took five years for the markets to recover from rock bottom, and a few more months to reach highs achieved right before the dip.
The markets will always recover, it's how you handle the dips that will determine the success of your investments. If you're ever uncertain, consider talking to a financial advisor who can guide you in the right direction.