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Coronavirus: How to invest if the ASX 200 falls further

The coronavirus pandemic has many Fools wondering how to invest their money right now with the S&P/ASX 200 Index (ASX: XJO) falling lower. The benchmark index closed 1.98% lower on Thursday as a number of blue-chip shares were sold down.

So given the current volatility, what should be your strategy to weather the storm?

How to invest if the ASX 200 keeps falling

It’s normal to be fearful when you’re watching the ASX 200 fall right now. As much as you might have an investment strategy when times are good, it’s harder to stick with it when the market is falling.

Diversification is an investor’s best friend right now. If you can spread the individual company risk across multiple ASX 200 shares, that should help to reduce your volatility. That means setting your own limits on how big your position in a company can be relative to the rest of your portfolio.

Dividends can also be helpful when times are tough. As the old saying goes, cash is king, and that’s especially true in a bear market. The ASX 200 is down 22.89% since the start of 2020 which means growth shares have been hit hard. However, dividend shares are a great place to start with your investment plan. 

By diversifying across dividend shares like Telstra Corporation Ltd (ASX: TLS) and Fortescue Metals Group Limited (ASX: FMG), you can reduce your risk and increase your income in 2020.

But what about waiting it out?

If you’re working out how to invest in a bear market, it may be tempting to just sit on cash until the ASX 200 finishes falling. However, timing the market rarely yields strong results. The reality is that market timing is largely to do with luck rather than skill.

Rather than trying to pick the bottom, it’s best to buy on the way down and on the way back up. This is referred to as dollar cost averaging and could be a good way to invest in the ASX 200 right now.

If you’re investing in ASX 200 shares, it should really be for the long-term. That means what happens right now may not have the biggest impact on your investment in 40 years, so buying good quality shares and staying calm is the key.

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Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.