“Sell Out” or “Hold Out”? A dilemma in a falling market

Recently, Hong Kong and US stocks have been in a downward spiral, with the former falling below 18,500 on 15th March 2022, its lowest close in over six years. Feeling nervous, many people have two options in mind: “sell”, or “hold out”? During a market correction, emotions are often our biggest enemy, and can easily prompt us to make unwise decisions. Once a wrong move has been made, selling in a falling market can turn paper losses into real ones and deprives assets of potential appreciation, which can prove very costly.

Just like life, investing has its ups and downs

The investment market, like life, is not always plain sailing. There are always ups and downs along the way. The stock market cannot rise endlessly. As sluggish economic conditions, geopolitical instability, disappointing corporate performance, and other negative factors affect market trends, it is normal to see corrections from time to time.

Buy quality stocks at a discount in a volatile market

A market correction can be seen as a reset before stocks recover to their previous highs. If you are investing long-term for the future, a short-term correction may not be a reason to change your investment strategy or portfolio. We have all heard the following quote from the famous investor Warren Buffet: “be fearful when others are greedy, and greedy when others are fearful”. This reflects his belief that falling markets can be good opportunities for investors to snap up quality stocks at discount prices. When markets rebound, the effects of asset appreciation come into play, providing investors with handsome returns.

Take US stocks, for example. While there have been ups and downs over the past twenty years, the average annual return has always remained at 6.7%. During the 2008 global financial crisis, those who continued to invest in the S&P 500 earned twice as much as those who stopped in just three months.

Long term investment takes the quiet approach to better returns

Therefore, as a long-term investor, a more preferred strategy for dealing with volatile markets is to keep investing, rather than “swapping horses” or leaving the market. Of course, we must maintain investment discipline when the market is falling, and keep our faith. If you lack self-confidence, you may  just invest in the right products and have a professional team manage your assets according to data, to avoid making unwise investment decisions due to personal feelings, thereby missing opportunities for asset appreciation.