In today’s unpredictable market, it’s easy to second-guess your investment choices. But according to money expert Suze Orman, there are clear signs that can tell you whether you’ve made a smart move — even when the market is down.
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Here are the signs that you’ve made a wise investment, despite what the market may be doing.
1. You Bought the Stock for the Right Reasons
When it comes to your investment choices, the “why” matters.
On a recent podcast episode, Orman said that it’s a good investment if “you did your homework, you believe in the company and you understand the business.”
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2. You’re Focused on Long-Term Growth
You should only invest in a stock if you have a long time horizon for the gains you are seeking.
“You are not investing for next month,” Orman said. “You are investing for five, 10 or 20 years from now, so short-term drops, they don’t matter to you.”
If you’re working with a shorter time frame, Orman said to put funds into a money market account instead of the stock market.
3. The Company’s Fundamentals Are Strong
Even if the stock price dips, it remains a good investment if the company demonstrates signs that it will be resilient in the long term.
“Their earnings are growing; the business is solid,” Orman said. “Nothing has changed, except the stock price.”
4. You’d Buy More Shares If the Price Drops
If you’d invest more in a given stock if you had the opportunity, that’s a sign that it’s a smart investment.
“If the price drops and you think, ‘Great, I can buy more at a discount,’ that’s called conviction,” Orman said. “That’s courage.”
5. Your Portfolio Is Diversified
You should only invest in a stock if it’s part of a diversified investment portfolio — it can’t be your only investment.
“You’re not betting the farm on one stock,” Orman said, “so you have the freedom to ride out the storm and even add more shares if you want.”
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This article originally appeared on GOBankingRates.com: Suze Orman: 5 Key Signs You’ve Made a Smart Investment
