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3 investment strategies to navigate the stock market in 2021

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Whether you’re new to the stock market or have been investing for decades, it never hurts to brush up on your strategy. As we approach the end of 2021, this is the perfect opportunity to check that your investments are on track and ready for the New Year.

Although each investor is unique and may have different preferences when it comes to their portfolio, there are a few universal investment strategies. These three guidelines can make it easier to navigate the stock market in 2021 and beyond.

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Image source: Getty Images.

1. Maintain a long-term vision

It’s easy to get caught up in the daily movements of the stock market, especially during times of volatility. While 2021 has been an incredible year for investors, many experts are warning that the market is overvalued and needs a correction.

Market declines can be intimidating and it can be tempting to sell your stocks or stop investing altogether if the market deteriorates. However, these tactics can be risky, and you may lose more than you earn if you sell at the wrong time.

To give your investments the best chance of surviving volatility, the key is to maintain a long-term perspective. The stock market has a long history of surviving crashes and corrections, no matter how severe. By staying invested for the long term, there is a good chance that your stocks could eventually rebound if the market goes down.

2. Focus on quality investments

Whether you invest in individual stocks, exchange traded funds (ETFs), mutual funds, or a variety of different investments, quality is key. While there is no one-size-fits-all approach to choosing the investments that are right for you, there are a few factors to consider when building a strong portfolio.

If you are buying individual stocks, do as much research as possible on each company. The best stocks come from organizations with the strongest underlying business fundamentals. The more you know about the companies you buy, the easier it will be for you to choose quality stocks that will perform well over time.

If you invest in funds such as ETFs, check that your investments match your risk tolerance and that your portfolio is properly diversified. You may be investing in hundreds or even thousands of stocks through your funds, but if they are all high risk stocks or from the same sector, you could be taking more risk than you think.

3. Don’t fall for the hype

The past year has seen the rise of memes stocks, and these high-risk, high-return investments can be tempting. Especially since investments such as cryptocurrency Shiba inuearning explosive returns, it can be hard to ignore the hype.

However, when an investment has garnered a lot of media attention, that doesn’t necessarily mean it’s a smart buy. Before investing anywhere, be sure to examine the fundamentals of an investment and try to determine why it is developing this way.

Shiba Inu, for example, has achieved astronomical returns thanks to its loyal clientele of retail investors. These investors buy the cryptocurrency en masse, thereby increasing its price.

After the Shiba Inu price spikes, many of these investors will sell for a quick profit, and the price will drop. In other words, Shiba Inu’s returns have very little to do with its strength as an investment, and it is possible to lose a lot of money by buying or selling at the wrong time.

It’s worth being critical when choosing new investments for your portfolio, so try not to let the hype get in the way of your decisions. By focusing on long term investments and doing as much research as possible, you will be on your way to building wealth in the stock market.

This article represents the opinion of the writer, who may disagree with the official recommendation position of a premium Motley Fool consulting service. Were motley! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

Sources

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2/ https://www.fool.com/investing/2021/11/06/3-investing-strategies-navigate-stock-market-2021/

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